We’ve had yet another successful year – our 17th consecutive profit for the airline with

the group returning a net profit of US$708 million (Dhs2.6 billion) on revenues of US$5.2

billion (Dhs19.1 billion). Emirates income amounted to US$4.9 billion (Dhs18.1 billion) and

Dnata’s turnover was US$385 million (Dhs1.4 billion).

Airlines are continuously being affected by the changing economic conditions of the world

– but none have been quite so financially devastating as the dramatic rise in jet fuel prices

which we faced in the second half of the financial year. Although we had hedged jet fuel

purchases as part of our forward planning, no one could have envisaged the surge in oil

prices which resulted in fuel costs rising from 14% to 21% of our total operating

expenditure. In order to remain on target we had to introduce another round of drastic

cost-cutting, a recruitment freeze (except for Flight Deck, Cabin Crew and Engineering

staff) and a fuel surcharge (which of course, did not cover the increasing costs).

The tsunami was a tragic disaster which claimed so many lives and wrought awesome

destruction in many areas of South-East Asia. SkyCargo was able to play a role in

carrying supplies to the affected areas but now Emirates has to work with the authorities

to help the tourism industry in Sri Lanka, the Maldives, India, Thailand and Indonesia.

I have no doubt that my senior executives will have to spend the next 12 months

explaining to other airlines and journalists that we made this very satisfactory result

without government assistance or subsidies. Since we started the airline in 1985, our

competitors seem to find it incomprehensible that we can make profits by having a skilful

team which works hard, is a market leader and invests heavily in new equipment – surely

the criteria for any successful company?

It was, therefore, reassuring to read in the recent UBS Investment Research Report the following

“...we can find little direct evidence of any subsidy and believe that the competitive strengths of

the group can be explained by the underlying business model rather than special treatment”.

Obviously, we are concerned to clarify any misconception, especially at a time when the

European Union is looking closely at government subsidies for airlines. I reiterate to all the

sceptics that you are invited to examine the pages of this annual report and I hope you will be

convinced that Emirates is not the recipient of any subsidies. On the contrary, I am happy to

report that once again we will pay a dividend to our shareholder, the Government of Dubai, of

US$100 million, as well as a bonus for each member of the staff of the Emirates Group.

6

The Emi rates Group

Chairman’s ReviewH. H. Sheikh Ahmed bin Saeed Al-MaktoumChairman of The Emirates Group.

We continue to be a popular company as our brand grows stronger

and at the end of the financial year the headcount had reached

25,000 employees in Dnata and Emirates, with a 10% increase in job

applications to 240,000. Our staff come from 124 different countries.

For me personally there were a number of highlights abroad and

at home – overseas I made visits to the Air Show in Farnborough,

UK, to sign contracts for more Boeing 777s and an inflight

entertainment system for the A380s; to Vienna to open our new

route; to the Seychelles to celebrate our fifth destination in the

Indian Ocean; to Toulouse to attend the A380 Reveal (as the

biggest purchaser of this double-decker Super Jumbo) – while in

Dubai I’ve opened a new Holiday Lounge at the Dnata Travel

Centre and welcomed Dnata’s future plans with the first A380

towbarless pushback and towing tractor already received.

Development started on a web portal which enables freight

customers to clear formalities from their own offices. Dnata

continued its healthy expansion by acquiring the CIAS (Changi

International Airport Service) in Singapore.

Preceding Emirates’ launch to New York and Shanghai,

Commercial’s roadshows in USA and China were professional

enough to have graced any TV programme and certainly thrilled our

most important customers – the travel agents.

Al Maha won awards for its architecture and environmental

protection and made money for the company with its expansion.

Behind the scenes, we have many unsung heroes. Our engineers

have been involved in the design configuration of various systems

to be included in the Emirates A380 and our workshop has

successfully completed the reconfiguration of three Boeing 777-

200s including complete refurbishment of the cabin interior and

upgrade of the video-on-demand units ...a massive task to be

undertaken inhouse.

We recruited another 300 UAE nationals as graduate trainees,

cadet pilots and engineering apprentices – and introduced a

national career development strategy.

Our worldwide sales staff benefited from a continuous supply of

business aids to present the group products to future clients and

Ms Sarah Andrews of Auckland won the Chairman’s Award for her

sales and marketing prowess.

Our loyal passengers are the reason for Emirates’ existence and we

continue to acquire new aircraft so that we can offer more

destinations with a higher comfort in a modern fleet of wide-body

aircraft which are on average less than five years old. We were

delighted to welcome the one millionth member to the Skywards

Frequent Flyer Programme which we share with SriLankan Airlines -

nor did we forget the young passengers with new style meal boxes

which they can take home with them after the flight. We even

remembered the group staff who are leaving us after many years’

service introducing Post Retirement Medical Insurance benefits for

the eligible retiring employees.

The group is fortunate, indeed, to be based in Dubai where a

visionary government is investing billions of dollars to develop the

city into a major commercial, residential and tourist hub and the

Emirates Group is playing a pivotal role.

Finally, I would like to thank the staff of Emirates and Dnata for

their quite outstanding contribution to this excellent result.

Ahmed bin Saeed Al-Maktoum

7

At the end of the financial year the headcount hadreached 25,000 employees in Dnata and Emirates,with a 10% increase in job applications to 240,000.

A380 Reveal speech. A CNN TV Interview.

As His Highness has stated in his foreword to this report, the performance of Emirates

and Dnata, like other travel companies, has been affected by the surge in the price of

oil. To put it into context from a global viewpoint, the International Air Transport

Association (IATA) reckons that every $1 rise to the price of a barrel of oil adds $1 billion

to the airline industry’s fuel bill. As a result IATA states that the net losses for the year

will be approximately $5.5 billion making cumulative losses for the industry of $40

billion since 2001.

Against this background, for the group to achieve another record year of profits

underlines our quite unique business model, incorporating a flexibility which has

enabled us to “see off” three wars, a plague, SARS, global economic downturns and now

very high jet fuel prices.

As His Highness points out, the fact that we have been able to return a handsome profit

has nothing to do with hand-outs, but is down to the creativity of our management team

and sheer hard work of the staff, helped of course by the rebound in international air

traffic in 2004/05, up nearly a quarter in the Middle East (mostly, however, coming from

Dubai) and by a fifth in Asia.

I would also like to acknowledge the benefits of being a Dubai-based company. This is

an incredible emirate growing at some 17% per year and now popular as both a tourism

destination and a commercial hub. In addition to the massive expansion of Dubai

International Airport, which will be one of the largest in the world in 2006 with a

capacity of 75 million passengers, construction of a new airport has been started at

Jebel Ali underlining the growth of 15% per year in passenger (18% in cargo) traffic

to/from and through Dubai. Both factors auger well for our planned development

centered around a modern fleet and an efficient 24-hour hub.

By 2012 Emirates alone will be carrying some 33 million passengers in its fleet of 151

aircraft (including 12 freighters). If this all sounds exaggerated, take a trip to Dubai and

see the extraordinary infrastructure which is being developed with projects like

Dubailand (a theme park double the size of Disneyland, Florida), Dubai Waterfront,

Dubai Business Bay, Festival City and a myriad five star hotels, plus the offshore Palm

Jumeirah, Palm Jebel Ali, Palm Deira and The World...engineering developments which

have grabbed global headlines.

8

The Emi rates GroupReview by Vice Chairman& Group President

Maurice Flanagan CBEVice Chairman and Group President

With an expected population of five million by 2010, Dubai needs

Emirates to serve its commercial and tourism industries, as well as

the other 100 airlines operating into Dubai with very healthy

loads, and we need Dubai for its catalytic influence on passenger

and freight growth.

To be a part of this unique environment means that we have a

responsibility to prepare for this exceptional growth, hence our

$30 billion worth of aircraft on order.

With so many superlatives flowing around Dubai, we never forget

that our job is to provide a seamless service for our passengers

and cargo customers. This means that we have to invest heavily in

training so that we maintain our recognised high standards – and

build for the future expansion, with eight hangars for the new

A380 and a new Emirates Group head office, to cater for our

burgeoning staff, already under construction at Dubai

International Airport.

If Dubai has now well passed the “tipping point” at which it is

globally accepted as a major tourist attraction, then Emirates, too

has broken through the business barrier, continuously named in

polls as one of the Top Five airlines of the world in terms of quality

and profitability.

Dnata has been around for as long as there has been an airport in

Dubai and it still provides 24/7 dependability for the 100-plus

scheduled international airlines operating through the airport. It

has a fleet of 960 vehicles, a staff of 6,596 and is recognised as

being among the elite of ground handling agents. The Freezone

Logistics Centre at Dubai International Airport has been expanded

four times, such is the demand for Dnata‘s freight services while

Dnata Agencies continues to meet the challenges of e-technology

and has exported its sales expertise to Saudi Arabia and Kuwait.

“But all work and no play”...and the Emirates Group staff have

excelled in many sports during the year. I was very pleased to see

our Cricket Team record a second win against the Lord’s Taverners’

team, which included not only ex-Test heroes but several current

English County cricketers and also defeated first class English

County side, Durham, in a 40-over cliff-hanger, while the Emirates

Rugby team won the Social Tournament at the Emirates Airline

Rugby 7s for a record third year in a row.

For me, one of the most exciting and satisfying trends of last year

was the innovative and enthusiastic manner in which all departments

of the business embraced next-generation technology interfaced with

the personal touch – from award-winning Emirates SkyCargo with its

quite unique SkyChain, to innovative Commercial Operations with

the dramatic increase in the use of e-ticketing.

It is with much pleasure that I record our thanks to the group’s quite

remarkable staff who never failed to meet and surpass the challenges

of this year with a passion and skill which makes us all proud.

Maurice Flanagan

9

By 2012 Emirates alone will be carryingsome 33 million passengers in its fleet of151 aircraft (including 12 freighters).

Emirates wins the annual cricket match with the Lord’s Taverners. An architectural perspective of the new Emirates Group Head Office.

11

Emi rates

The Airline

During the course of this year the airline increased production by 30% and opened six

new on line points namely New York, Shanghai, Glasgow, Vienna, Seychelles and

Christchurch. Income grew by 36%, yields by 6.0% whilst the number of passengers

carried rose by 20% to 12.5 million and cargo by 27% to 838,400 tonnes. This growth

had to be managed against the backdrop of rocketing fuel prices and in the latter part of

the year, the tsunami effect.

It was clear by the end of the second fiscal quarter that there was evidence of a new

paradigm in fuel prices which called for immediate action to address both its short and

long term consequences. Recruitment outside the operational areas was frozen and non

essential costs stripped out. Schedules were reworked to optimise efficiency on only the

most profitable routes and capacity was redeployed to take advantage of the Indian open

skies period between December 04 and March 05. We were able to do this by

postponing our planned operations for the second daily New York frequency and the

daily San Francisco.

All this has meant an increase in productivity per employee and the airline’s ability to

grow its profit by 49% over the previous fiscal year. This is a huge credit to all our staff.

In the latter days of March we took delivery of the first two Boeing 777-300ERs, part of

an order for thirty with sequenced deliveries for the remainder over the next two and half

years. Interestingly, these two B777-300ER deliveries witnessed the commencement of the

airline’s enormous order programme with 97 aircraft being delivered at an average rate of

one per month for the next eight years. I have absolute confidence that the airline will be

able to manage the challenge of this formidable growth.

Tim Clark,

President Emirates Airline

Tim ClarkPresident Emirates Airline

Commercial Operations

When we started the airline in 1985 our timetable was the size of a folded postcard, easily

able to show the three destinations we served from Dubai. Today the timetable numbers

743 pages in the pocket-size version and 384 in the larger format, plus covers.

With nine new aircraft joining the fleet, some 75 extra flights per week were added and

the network grew to 76 destinations. During the year we inaugurated new services to

New York, Shanghai, Christchurch, Glasgow, Vienna and the Seychelles and in the next

financial year we will add three new cities to the network – Seoul, Hamburg and Beijing.

We broke new ground when daily operations were started between Dubai and New York,

using the long range A340-500, the first passenger service to J F Kennedy Airport

following successful freighter operations. The June 1st inaugural had been preceded by

Commercial offering presentations to nearly 2,000 travel agents in road shows in New

York, Boston and Washington. The service is now attracting healthy load factors.

Indicative of our long-term plans for North America is the construction of a new 13,000

square feet First and Business Class lounge at JFK’s Terminal Four, the largest airline lounge

at the airport and designed to accommodate A380 Super Jumbo operations slated to begin

in March 2007.

Special promotional support campaigns were implemented to support Emirates’

commitment to the Dubai Shopping Festival, Dubai Summer Surprises, Dubai World Cup

plus other events including conferences and conventions. The Dubai Stopover

Programme, designed to encourage visitors to break their journey when transiting Dubai,

grew strongly with sales increasing by 60%.

The field sales teams and their Dubai-based colleagues worked more closely than ever, fully

supported by all departments across the group to ensure revenue and passenger targets

were exceeded. Sales aids ranged from the manual “Filofacts” folder to the automated

Mercator-created One/ Network, a system designed to keep tabs on all customers.

E-ticketing, first introduced on the trans-Tasman route, has now been expanded across

the network bringing significant benefits to customers.

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Emi rates

The AirlineTwenty-four hours a day the Emirates fleet of75 aircraft serves a network of 76 destinations.

Emirates e-tickets are now being issued by travel agents in many

countries through contracts with global distribution system

providers and a number of interline agreements for travelling on

other airlines.

The travel agency community remains the largest and most important

distribution channel…vital to our continued growth. In keeping with

global trends, the number of passengers booking their flights via

www.emirates.com grew tremendously during the year but we also

launched websites which were designed specifically to assist our

travel agents to sell Emirates’ products and services.

It was a year for millions for the Skywards Frequent Flyer

programme which reached the million members’ milestone in June

2004 – and to celebrate donated a million Miles to three charities.

Members, too, were given the opportunity of donating Miles.

Sixteen million miles were donated altogether and were used to fly

volunteer aid workers to areas where they were needed. Our top

Skywards member earned a million Miles since the launch of the

programme and was given the reward of his choice – a weekend

in a luxury resort in New Zealand.

Membership in Skywards continues to grow with a 60% increase

over last year and the programme itself won its ninth Freddie

Award for the best availability of flight rewards. These are

recognised as the “Oscars” of the Frequent Flyer Programmes.

From February 2005 Skywards’ Gold Cards incorporated e-gate

functions to enable electronic entry and exit through Dubai

International Airport Immigration – a world first for frequent flyers.

Customer Affairs and Service Audit (CASA) became more vigorous

and aggressive as the airline expanded with a two-prong approach

to help maintain high quality service for our passengers on board.

Service inspectors travel incognito criss-crossing the world to

ensure products are in line with company standards on the

ground. Other inspectors conduct checks at airports on front-line

and behind-the-scene staff and services. With 12 million plus

passengers, despite this constant monitoring and proactive

corrective action, mishandling incidents do occur and service

recovery to restore passenger goodwill continues to be an

important business strategy.

Relentless and continued use of customer feedback enables us to

identify service or product failures so that improvements can be

made as soon as possible.

As the company grows bigger, CASA will concentrate on key areas of

personalised customer contact to give Emirates the competitive edge.

Chauffeur-drive from home to airport and return is provided to First

and Business Class passengers at 27 destinations around the network,

with some 500,000 passengers using this service every year.

Commented Ghaith Al Ghaith, Executive Vice President

Commercial Operations Worldwide “Despite the challenges, the

past year was our best ever in terms of passenger sales and

revenue generation. Although margins were threatened by

spiralling costs, efficiency gains, increased productivity and yield

improvement strategies were successfully employed.”

13

During the year we inaugurated new services to New York, Shanghai, Glasgow,Vienna, Christchurch and the Seychelles and in the next financial year we willadd three new cities to the network – Seoul, Hamburg and Beijing.

Vienna – one of the new cities added to the network. Unique mini-suites in First Class on Emirates A340-500s. Ghaith Al Ghaith, Executive Vice President CommercialOperations Worldwide, was the main speaker at theEmirates Seoul road show.

Engineering

Reflecting the expertise and high standards of Engineering, three two-class Boeing 777-

200s were completely refurbished inhouse. The cabin interior was renewed and the In-

flight Entertainment System upgraded to Video on Demand. This was a complex task

requiring close coordination with many third party suppliers and was carried out in

parallel with other heavy maintenance work. Building on this success, a programme has

been started to reconfigure the three-class Boeing 777-200s in the same way.

Another major step forward was the preparations and training to establish in-house design

capabilities for aircraft modifications. This capability is expected to be recognised shortly

and will allow Emirates to have greater autonomy to design minor modifications in-house

without the dependency on third parties.

In fact, Engineering has been actively involved in the design configuration of various

systems that will be included in the A380 aircraft due to enter service in 2006.

Engineering has been working closely with Airbus to ensure that Emirates specifications

will be met and unique features will be provided with a high level of comfort, reliability

and ease of maintenance.

To ensure that cabin standards and systems are maintained in a pristine condition, a

dedicated cabin management team has been formed to meet aircraft on arrival. In

addition specific maintenance tasks for aircraft systems have been introduced.

Work has commenced on building the new engine test cell, which will be one of the

largest such facilities in the world, capable of testing engines up to 150,000 pounds

thrust. This facility will be equipped with state-of-the-art equipment and with quick

transfer stands for testing various types of engines currently available in the industry.

The construction of the new Technical Centre is progressing on time and the office staff

will be relocated in the landside office building in November 2005, while the first phase

of the airside hangars will be completed by December 2005 when four bays will be ready,

with three other bays coming on line three months later. Capable of accommodating the

huge A380 aircraft, the facility will be completed well ahead of the arrival of the first

Emirates A380 in October, 2006.

14

Emi rates

The AirlineBelow left: Adel Al Redha, Executive Vice PresidentEngineering & Operations, checks out one of the GE90-115B engines powering the Boeing 777-300ER on deliveryat Boeing's base in Seattle.

Engineering personnel upgrading the entertainment system on aBoeing 777-200.

Emirates Engineering can claim to be the Centre of Aircraft

Maintenance Excellence in the Middle East with the renewal of its

ISO 9000/2000 certification and the US FAA Part 145, while it also

obtained EASA Part 145 Maintenance Approval, EASA Part 147

Technical Training approval and EASA Part 21 Design Organisation

Approval from the European Aviation Safety Agency.

Adel Al Redha, Executive Vice President Engineering and Flight

Operations stated “Our Engineering team passed an important

milestone with the refurbishment in-house of the 777s. I would

also like to make a special mention of our multi-national pilots

who once again proved themselves to be the best in the business”.

Flight Operations

With nine new aircraft joining the fleet, 158 more pilots were

recruited bringing the total complement to 1,135. Our Captains and

First Officers come from 60 countries including the UAE (96 pilots

with a further 45 UAE nationals under training).

Flight Operations has been working closely with Air Services

Australia, signing a strategic partnering charter. This allows Emirates,

in conjunction with Air Services Australia, to plan and use flexible

routings over the Indian Ocean between Dubai and Australia. In line

with Emirates policy of working closely with Civil Aviation

authorities and Air Traffic Service providers, Emirates has also

negotiated the opening of shorter airway routes within the Russian

Federation from Dubai to Europe and the United States which again

leads to a reduction of fuel usage and a correspondingly improved

environmental impact.

Maintaining its market leadership, Emirates has ordered 30

Electronic Flight Bags (EFB) for its Boeing 777-300ER airplanes,

making it the largest customer for this system. EFB stores digitally

all documentation that pilots typically carry onto an aircraft.

Combined with other data link initiatives, utilising terminal wireless

for up-linked weather, flight plans, load sheets and clearances, this

new technology forms an integral part of Emirates 21st Century

Flight Deck Information Management Solution.

Emirates SkyCargo

Once again Cargo made a record contribution to the airline’s

transport revenue exceeding 20% - the highest freight contribution

of any carrier in the world with a similar fleet make-up. Revenue

increased by 43% to US$940 million (Dhs.3.45 billion), tonnage

rose by 27% to 838,400 tonnes while yield increased by 6.9%.

As well as using the bellies of wide-body passenger aircraft,

SkyCargo operated a fleet of six Boeing 747 freighters (four B747-

400F and two B747-200F), wet-leased from Atlas Air. During the year

six new destinations were added to the network plus new cargo-only

services to Johannesburg, Nairobi, Lahore, Milan and Budapest.

There are now scheduled freighter services to 20 destinations

responsible for some 34.5% of the hard cargo revenue.

An innovation for Emirates in the next financial year will be the

introduction into the fleet of three A310-300F freighters which will

be responsible for providing a seamless distribution to the region

from the intercontinental freighters and core passenger fleet bellies.

In the first quarter, demand was consistently high with capacity

utilisation being optimised from the Pacific Rim region to Europe,

though US demand was lower than expected. In the second

quarter, despite the increasing cost of fuel, performance met the

forecasted levels with high demand to the Middle East due to the

bonanza from oil revenues. In the third quarter there was an

increased demand from China to Europe as a result of more

capacity, and despite the fuel surcharge the demand remained

high up to the New Year holidays.

15

SkyCargo made a record contribution to the airline’s transportrevenue exceeding 20% - the highest freight contribution ofany carrier in the world with a similar fleet make-up.

An Emirates 747-400F Freighter.

In the fourth quarter the tsunami struck with its tragic consequences and Emirates ferried

over 1,000 tonnes of relief supplies into the affected areas. Nearly Dhs3 million in freight

transportation charges were absorbed by Emirates to support the relief efforts.

The freighter operations both for scheduled and charter services remained buoyant.

The revolutionary SkyChain system continued to be enhanced. The first stage, Skylog,

was cut over successfully in August. The system is delivering the planned business

efficiencies in Cargo Terminal operations and Inventory Management.

Approval was given to design and build a next generation IT solution to facilitate cargo

business and supply management requirements. With specifications provided by SkyCargo,

Mercator will design and build the system which is expected to be cut over in 2006.

When it comes to infrastructure, the Dubai International Airport expansion continues and

the first phase of the 1.2 million tonne capacity Cargo Mega Terminal is expected to be

opened in September 2006. A total of 707,000 tonnes were handled through the present

SkyCargo Centre representing a 24% increase over last year.

SkyCargo was again recognised for its quality service by its peers with no less than eight

awards including “Air Cargo Carrier of the Year” from the International Freight Weekly and

“Best Airline to the Middle East and the Indian subcontinent” from Air Cargo News.

Finally SkyCargo’s Post Office mail revenue grew by 52% due to the close co-operation

with Emirates Post.

16

Emi rates

The AirlineEmirates SkyCargo operates an extensivenetwork of feeder trucks plying the roadsfrom Amsterdam to Wellington.

Destination and Leisure Management

With a substantial growth in business and more than 300,000 clients,

Destination and Leisure Management has placed Emirates as a top

player in the international leisure travel market.

Sales revenue grew by 37% to US$219 million (Dhs803 million)

surpassing all targets in the Long Term Plan – a quite incredible

result taking into consideration the impact of rising fuel costs and

the tsunami. Arabian Adventures had another excellent year with

new product offerings including “Corporate Services” for the

organisation of large meetings and events.

A number of important functions were staged at Arabian Adventure’s

own Lisaili Fort, including the Dubai World Cup Gala Dinner and the

closing event of the Dubai International Film Festival. There were also

familiarisation visits for travel agents and corporate houses in

connection with the launch of the New York service.

Arabian Adventures conducted a major study of Dubai’s current and

future hotel room inventory between 2005 and 2010. This report

highlighted the current shortage of rooms and the need for additional

hotels in order to achieve the target of 15 million visitors by 2010.

A new project was the creation of Congress Solutions Dubai, a

professional conference organiser which will provide management,

technical and logistical support to international congress

associations, intergovernmental meetings and multi-national

corporate gatherings.

Some 100,000 tourists used Emirates Holidays services, the top

destinations proving to be the UAE, Malaysia, Thailand, United

Kingdom, Egypt, Mauritius, the Maldives, Singapore, Lebanon and

India. The six destinations growing fastest in popularity were Singapore,

Australia, Switzerland, Austria, Hong Kong and New Zealand.

The new Emirates Holidays’ brochure was launched to over 400

travel agents and tourism office representatives and Holidays’

partners from 40 destinations. There were road shows, too,

featuring the Seychelles and Mauritius, and to support the travel

trade in June Emirates Holidays released TradeNet, a real time

electronic information pricing, quotation and availability system,

with subsequent updating every three months. Other management

tools included an information and decision system developed by

Mercator to provide real time business performance indicators.

Ten suites, a spa and conference centre were added to the Al Maha

Desert Resort & Spa which helped the hotel return a net profit.

Al Maha won two important awards: World Legacy Award from

National Geographic and Conservation International presented by

Queen Noor of Jordan in Washington DC, USA and the 8th Arab

Cities Award for Architecture from the Arab Cities Organisation.

Emirates continued sponsorship of the Dubai Desert Conservation

Reserve (DDCR) signing contracts with safari operators who have

been allowed to operate within this area.

By limiting the visitor numbers and improving the organisation of

the desert safaris, the habitat damage is avoided and the overall

visitor experiences have increased substantially. An estimated

200,000 visitors visited the DDCR during the year.

17

Al Maha won two important awards: World Legacy Award fromNational Geographic and Conservation International and the 8th ArabCities Award for Architecture from the Arab Cities Organisation.

Seychelles – a new destination. Al Maha Desert Resort & Spa.

An informative booklet of the wildlife is now available for visitors. More than 50 Arabian

Oryx have been released into the DDCR from Al Maha over the year, with more to follow

in April ’05 along with releases of several other species. The development of the DDCR

has gained much recognition from the travel industry, as well as serious conservationists

and organisations.

Planning, International and Industry Affairs

A total of nine new aircraft were delivered in the financial year – two A340-300s, four

A340-500s, one Boeing 747-400F and two Boeing 777-300ERs resulting in a fleet of 75

aircraft (69 passenger and six freighters).

There was an increase in flights and capacity in all the regions of the world. In Europe

Emirates commenced daily flights to Glasgow in April and one month later four weekly flights

to Vienna, plus a fourth daily service was added between London Heathrow and Dubai.

For the first time, Emirates began serving New York with the long-range A340-500,

providing a non-stop service between USA’s largest city and the Gulf.

In South East Asia, Emirates opened a new route to Shanghai which became a daily

service from June. At the eastern most end of the network we began services to

Christchurch via Melbourne, which were increased to daily flights from December.

In the Indian Ocean, Seychelles was linked to Dubai thrice weekly and in North Africa we

added a sixth service to Casablanca.

To help maintain the momentum of Emirates’ development, International Affairs were

involved in negotiating traffic rights in Austria, Greece, Argentina, Brazil, Finland, Peru,

Afghanistan, Senegal, Zimbabwe, Mauritania, the Democratic Republic of Congo,

Cambodia, Thailand and Vietnam.

To enhance the benefits of participating in the IATA Settlement Systems, Industry Affairs

department continues to represent Emirates at the IATA Agency and Service Conferences

for passenger and cargo as well as the IATA Policy Groups for Billing and Settlement Plan

and Cargo Accounts Settlement System.

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Emi rates

The AirlineThere are more than 100 nationalities amongEmirates cabin crew.

With the addition of Croatia, Estonia, Latvia, Lithuania and Iceland,

Emirates now participates in 44 of the 77 operating Bank

Settlement Plans worldwide. From an IATA/IACO perspective

Industry Affairs continued to monitor industry policy matters

including disability related rules, denied boarding compensation

schemes, anti-dumping, aviation and the environment, open skies,

slot allocation and new aviation issues from the European Union

and USA.

Market Research continues to provide a greater understanding of

the Emirates Group’s competitive position through various research

managed in-house and competitive benchmarking data purchased

from third party suppliers. This covers not only our service aspects

but also reservations, airport services, in-flight and brand and

advertising awareness.

In conjunction with Human Resources, Market Research has driven

a series of employee studies across the group to help identify areas

for staff and process development.

Service Delivery

One of the major contributing factors to the strength of the Emirates

brand has always been the quality and high standards maintained by

our multi-national cabin crew. They have again excelled in helping

us to win a bevy of new awards from satisfied customers.

We now have a complement of 5,600 cabin crew, some 1,200

newcomers joining during the year. Training and experience are

paramount in our crew’s efforts to provide an enjoyable and

comfortable journey for all our passengers. But sometimes the

unexpected occurs – as when Senior Flight Stewardess Georgina

Xidas and Stewardess Katrina Smith delivered a healthy baby boy at

30,000 feet.

There were also a number of occasions when our cabin crew were

in contact with Med link, a 24/7 panel of doctors in Phoenix, USA,

who advise on measures to take should passengers fall ill during the

flight. Backing up the crew’s first aid knowledge is training in the

use of defibrillators which are carried on all Emirates’ aircraft.

On one occasion the crew used their diplomatic skills to handle a

potentially serious situation over Australia when an aircraft was

diverted to offload a man wanted by the police. Underlining this wide

variety of skills is a “Make Someone’s Day” video featuring cabin

crew musicians and singers, a precursor to a service training

programme to run in 2005. Off duty two cabin crew members

braved the waves off Jumeirah Beach, Dubai, to save a drowning

man, while a large number of staff worked for a number of charities.

A new Crew Briefing Centre was opened which will enable Service

Delivery to test out new concepts and technologies in preparation

for moving into the new Headquarters Building in two years’ time.

On June 1st Service Delivery played an important role in the

launch of our new service linking Dubai and New York with the

long-range A340-500. There are traditional American-style menus

for this North American service, in line with our determination to

have onboard meals which take into account the nationalities of the

majority of passengers on a particular route.

Today we have 43 catering uplift points across the Emirates’

network with 55,000 meals a day supplied by the carefully-

selected caterers.

Over 700,000 children’s meal boxes were handed over, cleverly

designed so our younger travellers can take them home as souvenirs.

19

Emirates now has 5,600 cabin crew,1,200 newcomers joining this year.

The new First Class seat in the Boeing 777-300ER.

We had another excellent year for Duty Free Sales, with revenue increasing by 16%

compared with 2003/2004. Some 50% of the product range was changed during the year

and two new brochures for passengers’ choice were introduced.

Our association with the Mont Blanc brand continues with a worldwide exclusive allowing

Emirates to be the only airline featuring a Mont Blanc passport cover in our onboard

selection. Another new deal just concluded will see Emirates introduce Bobbi Brown

cosmetics on board from June 2005, one of only two airlines in the world invited to carry

the product this year.

Airport Services

With a growth of 20% in the number of Emirates passengers handled at Dubai International

Airport, we now have more than 900 uniformed personnel assisting customers through

check-in, boarding, transfers and in baggage services. In total there are now 1,679 members

of staff in Emirates Airport Services.

As part of an ongoing expansion of Emirates Lounges, new facilities were opened in

Brisbane and Auckland airports – to follow soon are similar exclusive lounges at Perth,

Melbourne, Sydney, London Heathrow, London Gatwick, Paris, Nairobi, Bangkok, Hong

Kong, Kuala Lumpur, Frankfurt, Munich and New York.

We also added a second Business Class lounge at Dubai International Airport, resulting in

a lounge at each end of the departure concourse maximising passenger convenience.

We opened additional self-service check-in kiosks in Dubai for First, Business and Economy

passengers, which brings the number of these machines to 11. In addition, kiosks were

upgraded to accept passengers with baggage, a service not previously available.

The department introduced a motivational programme entitled “Successful Together” -

supported by Performance Development and Training. The programme was rolled out to

all 1,679 staff across the Airport Services network establishing seven key performance

factors which help staff to reach corporate and individual goals. The initiative is aimed at

improving service delivery through improved staff morale, motivation and knowledge by

providing leadership training, staff empowerment and job multi-skilling.

20

Emi rates

The AirlinePassengers can now be checked in anywherein the Dubai Departure Terminal.

The chauffeur-drive service for passengers has been enhanced by

enlarging the chauffeur-drive lounge at Dubai International

Airport which now provides passengers with direct access from the

lounge to the waiting limousines.

New handheld PCs are currently under trial in the Dubai check-in

area. These allow staff to process a passenger, or dispense check-

in related information, at any point in the departure terminal,

rather then just at the check-in gates.

In addition to this, 20 new stations have moved to the automated

departure control system MACS, making a total of 52 stations

using MACS.

At Dubai International Airport the unsung heroes include the

Emirates Baggage Handling team ensuring that the transfer of our

suitcases and bags is carried out seamlessly and with on time

punctuality. All our figures show that, apart from a few days when

a blanket of fog descended on Dubai, the unit recorded another

improvement in performance and productivity.

Dubai International Airport

At the present time it’s a massive construction site surrounded by

cranes, but the world’s most advanced aviation hub is being

extended with a revolutionary design which places Terminal Three

below the apron and taxiway. Concourse Two also under

construction will be dedicated exclusively to Emirates and will have

special air bridges for handling the A380, as will Concourse 3.

The project is expected to be completed by 2008. With this

expansion, Dubai International Airport is expected to attract 52

million passengers by 2010.

21

There was an increase of 20% in the number of Emiratespassengers handled at Dubai International Airport.

Chauffeur-drive for First and Business Class passengers remains popular. Construction of a new terminal and concourses at Dubai International Airportis on schedule.

We launched a new marketing campaign during the year with the theme “Rest Assured”

highlighting the high standards which can always be expected from Dnata.

More recently we were delighted to receive two Quality Appreciation Awards – for Dnata’s

Airport Services and Dnata Agencies to add to the one won by Dnata Cargo several years

ago – which gave us the confidence that our training, investment in people and hard

work is paying off and shows that our campaign is based on fact.

All Dnata departments showed a healthy growth and record turnovers.

From opening an office in Kabul to adding new BTI partners in Morocco, Dnata’s regional

strength continued to grow and, without claiming any biggest or best title, we are

confident that Dnata is the leading travel services provider in the Middle East.

Emirates Flight Catering is the leading flight catering company in the West Asia region

and is building for the future with construction well underway for a new flight kitchen to

be opened in 2006 and a Food Preparation Unit to be launched later this year.

Dnata is maintaining its market leadership by always pushing the envelope out further,

examples being the touch-button yet personal atmosphere in the new Holidays Lounge at

the Dnata Travel Centre – and the purchase of the first towing tug for the A380 already

delivered to Dnata at Dubai International Airport.

MMI is flourishing and its innovative new products like Left Bank are claiming new

market shares while Costa, in the coffee shop environment of the UAE, continues to open

more outlets.

Our Associated Companies’ portfolio was greatly expanded when we acquired

Changi International Airport Services at Singapore International Airport.

Gary Chapman

President Dnata & Associated Companies

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Gary ChapmanPresident Dnata & Associated Companies

Dnata Airport Operations

Passenger and cargo traffic at Dubai International Airport has continued its fast-paced growth

in the past year. As sole operator at the airport, Dnata Airport Operations is at the heart of the

action, handling more than 186,000 aircraft movements this year (up 16% from last year).

To cope with the increased traffic, Dnata has continued to invest in initiatives that

improve efficiency and customer satisfaction. For instance, Dnata has linked its movement

control centre (MOCON) to the ground movement radar at Dubai International Airport,

enabling it to more efficiently plan and deploy ramp and airport resources.

The increased number of travellers passing through Dubai International Airport can now

enjoy Dnata’s newly refurbished and expanded Marhaba Airport Lounge, as well as a

quicker check-in due to new Optical Character Readers that help Dnata staff at check-in

counters to process passport data more quickly.

The Dubai Civil Aviation Department (DCA) has also transferred to Dnata the operation of

passenger buggies in the airport tunnel and concourse. Dnata’s passenger service

department now operates these vehicles in aid of travellers with special needs or those

requiring speedy transport assistance to catch a flight. More of Dnata’s airline customers

are also now benefiting from the iMuse common airport network, a system which allows

each airline to access their own reservations system.

In addition, behind the scenes, Dnata has commissioned new facilities dedicated for

painting ground support equipment and repairing unit loading devices (ULDs).

Quality service remained a focus for Dnata Airport Operations throughout the busy year,

with two Dnata staff being awarded Gold Stars in the DCA’s “Dubai Airport Cares”

champions league.

Dnata Airport Operations is also gearing up for arrival of the new Airbus A380 aircraft at

Dubai International Airport. This year it became the world’s first ground handler to accept

delivery of the first A380-compatible towbarless pushback and towing tractor. In developing

this vehicle, the manufacturer Douglas UK, tapped on Dnata’s experience in operating and

maintaining such equipment.

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Dnata's new A380 compatible aircraftpushback vehicle, TBL600, at work atDubai International Airport.

Dnata’s overseas operations continued to prosper. In Manila, Dnata

Wings became Dnata Inc. as the brand was consolidated and won

Qatar Airways handling contract – and it is now serving three

airlines in Manila.

In Pakistan, Gerry’s Dnata celebrated its 11th anniversary by being

awarded ISO9002/2000 and in Karachi obtained the ground

handling contract of Etihad Airways and Air Blue. In Lahore some

$600,000 were invested in a new cargo warehouse expansion.

In Tehran, Safiran Dnata continues to consolidate its position by

providing quality ground handling services to its clients.

In Qatar, Dnata concluded the four year management contract at

Doha International Airport.

In general, Dnata will continue its overseas expansion and there

are a number of opportunities which are being evaluated in the

Middle East, Africa, Indian sub continent and Asia.

Said Ismail Ali Al Banna, Executive Vice President, Dnata: “Dnata’s

teams at the airport are in the frontline of problem-solving, 24 hours

a day, 365 days of the year – and are one of the main reasons why

Dubai International Airport runs like clockwork”.

Dnata Cargo

Dnata Cargo revolutionised its operations this year with the

implementation of the Chameleon system in May 2004 after a year’s

intense planning and two years’ software development and testing

which represents 120 man-years of programming.

This software is an investment in Dnata’s future, allowing us to

approach our business in new and innovative ways. While the

software was designed for and by Dnata, it is now also being used

by Emirates (under Skylog name) and it is being actively marketed

worldwide by Mercator.

Dnata Cargo is building an extension to the Freezone Logistics Centre

(FLC) which will ensure Dnata will be able to keep satisfying its

customers and meeting the aggressive growth expectations of Dubai.

The FLC-III will be able to handle an additional 300,000 tonnes of

cargo per annum, and offer more than 15,000 square meters of

supporting office space for airlines and agents. Construction of this

facility started in March 2005.

Dnata will also see its E-Commerce Web Portal CALOGI (Cargo

Logistics International) come to fruition this year. The portal will

virtually eliminate the need for customers to interface at counters,

allowing them to complete all their formalities with Dnata Cargo

from their own offices via the internet. Development of CALOGI

started in February and is expected to go live in early 2006.

Statistically Dnata Cargo handled 458,000 tonnes representing an

overall growth of 13%. FLC reached 114,368 tonnes, a growth of

43%. The UCB Courier and AWB courier volumes have registered

growths of 37% and 105% respectively. Behind these statistics is a

team of specialists determined to maintain Dnata Cargo’s position as

the leading freight handler in the region.

25

The Freezone Logistics Centre at Dubai International Airportis again being extended.

Dnata's duty controllers in MOCON track aircraftmovement via the Ground Movement Radar (GMR)system at Dubai International Airport.

Sheikh Ahmed presents Ismail Ali Al Banna,Executive Vice President Dnata, with a Dubai QualityAppreciation Award.

E-technology at work on the ramp.

Dnata Agencies

The travel industry in Dubai is highly competitive and after 46 years Dnata still continues to

redefine its products to meet such a demand.

Our new Dnata Holidays Lounge in the Dnata Travel Centre features a play area for children

with the latest electronic games. Perhaps these young ones when they grow up will find it

quite natural to book Dnata Holidays on the moon? Such is the pace of life in the travel

world and especially in Dubai.

Dnata Agencies had a very satisfactory year returning a 14% increase in turnover, with

the new “Rest Assured” marketing campaign emphasising the company’s role as the

leading quality travel agent in the region.

At Emirates Group Headquarters, Dnata World Travel was expanded and given the new

look in our blue and green livery introducing a 24-hours day opening, the only travel

agency in the Middle East to offer such a service.

The new area now offers a variety of services for booking a holiday or a business trip and

includes the following sections: Airline Affairs, Government Travel, Dnata Holidays and

Dnata World Travel Retail.

The company is continuing to expand outside Dubai with Dnata Kuwait launched in June

last year. Among the innovations in the product portfolio was a 24-hour call centre to

handle customer requests, seven days a week.

Another new feature is “dial a ticket” where the customer can make all travel arrangements

over the phone and have his ticket delivered to the door for no extra cost.

From sophisticated Kuwait to Afghanistan is quite a long way but the United Nations in

Kabul awarded Dnata World Travel a contract to be the sole travel agency catering to all

the travel needs of that organisation. Dnata launched its new offices, complete with the

Galileo distribution system, with a professionally-trained staff to meet the ever-changing

demands from customers and corporate clients.

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Night shot of the Dnata Travel Centre onSheikh Zayed Road, Dubai.

In the Middle East and West Asia, Dnata in its capacity as Regional

Managing Partner for BTI has appointed several new partners

during the year in Morocco, Yemen, Kuwait and Sri Lanka to

further strengthen the network. This brings the partner count to

17 with more additions proposed for next year.

Meanwhile, back in Dubai, the Dnata Conference Centre unit has

handled over 7,000 delegates, positioning itself as an exclusive

small-to-medium conference provider with super modern facilities.

Strength through cooperation has always been a theme for Dnata

Agencies’ future growth and its partnership with Net Tours enables

them to offer products such as desert safaris, camel trekking and

dhow cruises, across the regional network.

Dnata also joined hands with Instone Regional to form a Marine

Travel force in the Middle East and West Asia.

Dnata Agencies were appointed the Travel Management Company

for Marriott International in the Middle East region. The appointment

comes as a result of the rapidly growing popularity for Marriott

properties among Dnata’s business and leisure customers.

CompanionPoints, Dnata’s loyalty programme was relaunched across

the UAE with a new logo and communications package which

captured the excitement and promise surrounding this brand.

During the year Government Travel Services opened new implants

at the Ruler’s Offices and the Department of Health, providing

personalised service and fostering good relationships between our

staff and their government clients.

AXIS purchased the Ocean Tour Operator System and launched in

record time in August developing an online trade website that

allows agents to quote, book and issue vouchers directly.

CIAS

In October 2004, Dnata acquired a 78.4% stake in

Changi International Airport Services (CIAS) from Temasek

Holdings, the Government of Singapore investment company.

Dnata has subsequently acquired the remaining 21.6% from the

minority shareholders.

This represents a significant investment by Dnata and reflects our

belief that Singapore (whose aviation strategies and policies are

very much aligned to those of Dubai) will continue to grow and

prosper as a major aviation hub in Asia.

CIAS is one of two ground handling service providers at

Singapore’s Changi International Airport. A third will commence

operations mid 2005. Employing 1,270 staff, CIAS provides a full

range of ground handling services including passenger, ramp and

cargo handling. It is also one of two providers of in-flight

catering. With 25 international airline customers CIAS handles

more than 380 flights per week.

Prior to the acquisition, Emirates switched its ground handling

contract in Singapore to CIAS. Emirates was very pleased with the

level of customer service that it enjoyed from its new handling

agent and this high level of customer service was the catalyst to

the subsequent acquisition.

Among CIAS’s many strengths is its small but highly experienced

management team who provide a flexible and responsive service,

tailored to the specific requirements of its airline customers. It

provides a very reliable and consistent level of service and has a

strong portfolio of high-calibre airlines.

Looking forward, Dnata and CIAS are now working together to

further enhance the level of customer service that can be offered.

27

The new Dnata Holiday Lounge offers games to keep younger customers occupied. A new look for the Dnata office at the Emirates Group Headquarters,now open 24 hours a day.

A programme has been launched to identify and implement synergies between Dnata

and CIAS, including an “Exchange of Excellence” programme which will allow managers

from both companies to visit each other to exchange ideas of best working practices.

CIAS has also initiated a programme of capital investment, including a new lounge for

the airlines’ premium passengers which is scheduled to open in 2005. CIAS also owns a

20% stake in GAHCO, which is a ground handling provider at Guangzhou Baiyun

International Airport in China.

Corporate Development

The growth of the airline industry has been a powerful motivator for the Emirates Group

to evaluate ground handling opportunities in many countries across the world, with a

view to promoting Dnata’s ground handling services as a global product which meets the

highest industry standards.

This financial year was significant in that it saw substantial growth in the travel industry.

A number of factors including the conclusion of GATT, end of quota systems and

expansion in economic blocks, such as in the European Union, have contributed to this

and the Group was in a strong position to take advantage of this growth.

Corporate Development, jointly with Group Finance and Airport Services, managed the

evaluation and acquisition of a majority stake holding in CIAS, (Changi International

Airport Services), the second largest ground handling company in Singapore. We

successfully concluded a service agreement with Bismillah Airlines in Bangladesh which

should offer substantial cost savings to the group. More recently we established a ground

handling business in Khartoum – Dnata Arabian Airport Services.

Performance of the Emirates Hotels LLC Le Méridien Al Aqah Beach Resort in Fujairah has

been superb, beating all expectations in its ability to generate revenues and meet

shareholders’ expectations.

Galileo Emirates

Galileo Emirates’ biggest news of the year was the receipt of BSP certification for OPATB2

(an acronym for Off Premise Automated Ticket and Boarding Pass)- the first step towards

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Costa Coffee Restaurant at Madinat Jumeirah,Dubai.

passenger self-service check in and electronic ticketing (e-ticketing)

for the Gulf region. Subsequently, e-ticketing was rolled out to all

travel agents in the UAE, Bahrain, Oman and Qatar.

UAE agents can now book electronic tickets on all Emirates

e-ticketing-enabled sectors as well as on seven other major

carriers. This represents a major cost saving for the airlines. We

have begun deploying OPATB2 to travel agents in the UAE.

Galileo Emirates’ solution for small and start-up airlines, resEZ, is

now being used by Jubba Airways and Star African Airlines. User-

friendly functions of resEZ can handle schedule creation and

update, inventory management and pricing, reservations, ticketing

and check-in and offer great benefits to airlines using the system.

Galileo Emirates also completed the upgrade to an iplatform for all

travel agency customers offering faster response times and the

added benefits of a web-based solution.

SafarEZ, Galileo Emirates’ B2B2C internet booking engine and

travel news gateway for the Middle East was further enhanced and

is now being extensively used in the UAE, Pakistan, Oman,

Bahrain and Qatar.

Internationally, Galileo International is now a subsidiary of

Cendant Corporation and a part of Cendant’s Travel Distribution

Services Division. This has provided Galileo Emirates with more

sales opportunities and the department is planning to present

Cendant brands to its customers.

We have retained our market share in the UAE, Oman, Bahrain,

Qatar, Pakistan and Sri Lanka, despite the active presence of all

the major Global Distribution Systems in the region. It remains the

leading Global Distribution System (GDS) in Dubai and Northern

Emirates and has retained its position in Abu Dhabi.

In partnership with Galileo’s distribution partners from the ARABI

group of airlines, Galileo Emirates participated in the Arabian

Travel Market. It was the first time the Galileo National Distribution

Companies in the region participated jointly in the event.

We have also broadened our geographical reach to Afghanistan

through our partner company Galileo Pakistan. Travel agents in

the country now have access to the power of the Galileo GDS.

MMI

MMI produced an exceptional performance for the past year with

every department achieving record sales – by introducing

innovative new products and taking advantage of business

opportunities, plus the opening of the first of a planned chain of

bar/restaurants.

Significant highlights included the completion of the acquisition

of the Duty Free Dubai Ports (DFDP) which has now been

integrated within our existing operations.

MMI beverages reported a strong performance, particularly in the

hotel segment which has been bolstered by Dubai’s continuing

tourist growth.

On the retail side of the business the new Smart Card system

(LIPS) replaced the old permit book – this project was managed

successfully with Dubai Police with the new electronic system

making it easier for new customers to acquire a licence.

MMI Consumer grew sales by 10%, successfully introducing

several new products. MMI Travel registered an increase of 25%

over the previous year’s sales with the inbound travel business of

Gulf Ventures achieving a healthy profit as the management team

focused on new business development activity.

29

MMI registered another very satisfactory yearin all departments.

“Left-Bank” bar/restaurant was an instant success for MMI. Le Méridien Al Aqah Beach Resort, Fujairah, continued to break records.

The Leisure Retail Division continued to forge ahead expanding its range of Costa Coffee

stores across the UAE with four new outlets being opened in Dubai and others in Abu Dhabi,

Sharjah and Ajman.

The Leisure Division completed a very satisfactory year with the continuing success of

the Seasons restaurant-bistro and the launch of the “Left Bank” bar-restaurant. This

ground breaking facility at the Madinat Jumeirah, Dubai, was an instant success with its

trendy design and adventurous food-cocktails combination.

In Oman, the Oman United Agencies managed to grow its turnover by 6% despite the

increasingly competitive environment. The new business operations in Salalah performed well

increasing market share and profitability.

Emirates CAE Flight Training

Emirates-CAE Flight Training (ECFT) a joint venture between CAE Inc. of Canada and

Emirates, completed a successful first full year of operation in their new 14-bay facility,

located next to the Emirates Aviation College.

With both US FAA and European JAA approvals, ECFT now counts over 80 worldwide

customers, including almost all the region’s airlines and corporate jet operators. With an

increasing base of customers from Europe and the Far East, ECFT is positioning Dubai as

both a regional and worldwide centre of excellence for aviation training.

Building on its success, ECFT will add another three level “D” Full Flight Simulators (FFS)

in the next fiscal year, a second B737 NG/BBJ, a second A330/A340, and a Bell 412 which

will be the first commercial helicopter FFS outside of Europe and the USA. ECFT has also

announced plans for expansion of two more Full Flight Simulators in 2007, a second

A320 and its first B777, bringing the total number of simulators to 11.

Emirates Flight Catering

It was another outstanding year for Emirates Flight Catering with the unit preparing a

record 16 million meals, handling 68,000 flights with an average of 45,000 meals

produced every day.

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Emirates Flight Catering serves more than 100airlines – with multinational chefsrepresenting the world’s major cuisines.

Emirates Flight Catering now serves 102 international airlines at

Dubai International Airport, as well as providing food, beverage

and auxiliary services to the hospitality lounges of Emirates, Air

France, British Airways, Gulf Air, and Dnata (Marhaba Lounge).

Following an earlier expansion, the unit now has a capacity of

over 55,000 meals per day and a new catering facility is under

construction which will be dedicated to the sole use of Emirates

with a capacity of 90,000-115,000 meal trays, opening in autumn

2006. This facility will be the largest of its kind in the world.

Emirates Flight Catering is also investing in a Food Production

Facility (Food Point) being built on a 33,000 square metre site in

the Dubai Investments Park which will be unique in Europe, the

Middle East and the Far East. Able to deliver 20 million meals a

year, the main product of the facility will be entre meals and meal

components for airline customers and other airline caterers in the

region. It will also serve the local and international retail and food

service market.

Production of food is a people business but with such huge

numbers of meals, the management and staff of 3,500 need

electronic support and “catersoft” will be the new software solution

to meet the business requirements. The project is expected to be

fully completed by 2006.

Hygiene, health and safety are of paramount importance to any

catering operation and during the year a team of European

consultants was commissioned to help to implement a new process

incorporating Hazard Analysis and Critical Control Points

Traceability to comply with IFCA’s world food safety guidelines.

Already stringent security procedures were upgraded and Emirates

Group Security was selected to take over the responsibility for all

security matters.

Highlights of the year included winning awards for excellence

from British Airways, Malaysia Airlines and Air France, as well as

being the official caterer of the Dubai Tennis Championships.

Jet Fuel Risk Management

Oil prices have remained stubbornly strong, skyrocketing beyond

expectations. The strength in prices has been due mainly to the

high demand in the Far East (particularly China), continued OPEC

discipline and larger speculative interest. As world demand surged

to the point approaching production capacity, extreme price

volatility followed and will continue to be a feature of the market in

the future. In addition, the supply of jet fuel tightened because of

the general shortage of refining capacity in the world. This resulted

in a widening of crack spreads and even higher prices for jet fuel.

WTI (West Texas Intermediate) crude prices ranged from $36 to

$57 a barrel, averaging $45 in the fiscal year. Prices closed the

fiscal year near the high of $57 a barrel. These high energy prices

necessitated extreme caution in setting current and future cover to

avoid payouts from the risk management activities in the event of

a price decline.

Accordingly we adopted a revised approach to the programme

which involved the increased use of optionised swaps. Such tools

allow us to achieve the maximum benefit with less downside risk.

As a result of the activities executed through our risk management

programme Emirates reduced its jet fuel costs by US$126 million.

31

Emirates Flight Catering has ambitious plansfor expanding its production.

Flight Training Simulator. Emirates is one of the airlines served by Emirates Flight Catering.

In this age of automation, massive investments in Information Technology (IT) are essential

to ensure that the Emirates Group remains market leaders.

IT touches all departments in the Group from e-tickets to Engineering, from Flight Operations

to Service Delivery, from Front Offices to Back Offices, from replacing network architecture

to the roll out of PDA (Personal Digital Assistants) solutions for Senior Executives. We have

concentrated on optimising the use of available technology. Our own Mercator, too, has

developed new software to allow us to make a quantum leap into the future.

As Emirates develops into one of the world’s major airlines in the next decade, training and

recruitment of thousands of new staff will be of paramount importance.

On the financial side, we are grateful for the significant vote of confidence in the Emirates

Group from the international and regional banking community, both for new aircraft loans

and assistance in new business.

With US$2.2 billion (Dhs8.2 billion) cash in the bank, we are confident that the strength

of our brand and our reputation will enable us to arrange the loans to meet the costs of

buying an average of one aircraft per month for the next eight years, which means

raising over US$30 billion worth of investments. The uncertainty of the price of jet fuel,

fluctuations in currency and the possible continuing rise in US$ interest rates, present

challenges for the group but I am confident we will continue to manage the growth and

meet our target objectives in the coming year.

Dermot Mannion

President Group Support Services

32

Group Support Serv ices

Human ResourcesDermot MannionPresident Group Support Services

Human Resources

A major issue for Human Resources has been the slow-down on

hiring as a result of the cost control measures in response to the

rapidly rising jet fuel price. The staff strength in the financial year

increased by 2,358, which, while still high, is around 41% fewer

than in the previous financial year. The Emirates Group headcount at

31st March 2005 is 24,761 employees.

With the sheer volumes of applications received by the Emirates

Group it was decided that only those made through the on-line

Group careers website would be accepted, save for senior

management appointments where alternative application sources

were still acceptable.

Internally, a dedicated Recruitment Information Intranet site was

developed and made available to all staff through the Group’s prime

communication portal, GroupWorld. The purpose of this was to

enhance the access of both managers and internal candidates to

quality information that assists them within the recruitment process.

To improve the service to all Group employees, a new enlarged

Service Centre with 12 counters and 10 kiosks was created which

has streamlined internal operations.

The sheer volume of transactions by HR Admin, Recruitment Admin

and Visa Services can be realised from the following numbers:

• Customers through the service centre reception - 160,000

• Personnel/dependent details updated - 25,300

• Visas processed (Residence, Visit & Duty Travel) - 36,800

• Letters issued (Service, Guarantee, Visa etc) - 125,000

• Employee documents scanned (Pages) - 750,000

• Identity card, Health card & Airport pass - 45,000

• Internal Vacancy Applications processed - 15,000

Emirates Group continued its impressive educational record with

2,800 Training and Development events coordinated in 2004.

These were attended by more than 26,000 staff and third parties.

An impressive 54% of Emirates Group employees across the world

are now using online learning as a method of self development, a

total of more than 13,000 employees. This represents a phenomenal

65% increase in usage of online learning since the previous year.

The Training & Development Department now offers 200 online

courses. Accessibility to these has been extended for employees by

providing Internet access to all UAE-based staff with plans to

extend worldwide by end March 2005.

The Aerospace and Academic Studies’ operations at Emirates

Aviation College have increased by 31% with 340 students

compared to last year’s 260 students. In September 2004, the

college registered 160 students – this is its highest intake in the past

few years. A total of 457 external candidates have undergone City

and Guilds-recognised Aviation Foundation training programmes

conducted by Emirates Aviation College. These provide a potentially

rich source of manpower for Recruitment within the Group.

The Emirates Group has also continued its involvement in the Global

Business Consortium with the London Business School.

This organisation includes some of the world’s most successful

corporations, including Oracle, Standard Chartered Bank and

Masterfoods, and provides high-calibre Emirates employees with the

opportunity to network with future leaders of these corporations.

Cohort 6 of the MBA Consortium commenced in September.

There are 41 participants in this programme of which 16 are from

other leading companies in the region who have recognised its

value and the innovative manner in which it is managed and run

by Emirates and the Bradford University School of Management.

This programme is now one of the largest of its kind in the region.

Caption

33

Below: Abdulaziz Al Ali (left), Executive Vice President HumanResources, with Saeed Mohammed, Senior Vice President,Procurement and Logistics.

More than 124 different nationalities are represented among our staff. Signing an agreement for U.A.E. nationals to gain a qualification in purchasing andsupply for the Chartered Institute of Purchasing and Supply (CIPS).

The Business Support Group was active in restructuring and change –management in a

number of departments in the Group, including the introduction of “Climate Surveys” to

give staff an opportunity to comment on organisation, culture, work practice, team work,

management style and internal communication.

Emirates Group launched the National Recruitment & Development Department e-Portal

this year offering information, guidance and support to UAE Nationals within the Group.

We also participated in the biggest National Career Event in the UAE - UAE Careers 2004 -

with a strong corporate presence. More than 1,000 applications were received at the event.

More than 300 UAE National trainees were recruited through various development

programmes, including graduate trainee, cadet pilot, Emirates Engineering in-house/HCT,

Dnata Engineering, cabin crew and school-leaver.

The “Mustaqbalkom” programme was piloted in Service Delivery where 55 UAE National

Cabin Crew attended development days which provided information on opportunities,

guidance with their ongoing career progression within the Group and personal

development plans for everyone.

The IATA Senior Diploma in Airline Management was concluded in November 2004 and a

formal Graduation Ceremony was held on 7 February to reward 35 UAE National Area

Managers, Airport Services Managers and Licensed Engineers from Commercial

Operation, Emirates Airport Services and Emirates Engineering.

Abdulaziz Al Ali, Executive Vice President Human Resources commented: “The Group’s most

precious asset is the staff and it was noteworthy this year that the productivity per employee

once again grew. We are doing all we can to protect and nourish this vital resource”.

Performance Development

Performance Development works with line departments on strategic and tactical projects

that will improve productivity and overall business performance across the group. Our

work on process improvement and organisational design continues to be wide ranging

and we have developed processes and systems to manage material handling and storage

logistics in the new Engineering facility.

34

Group Support Serv ices The Emirates Group Clinic employs 14 doctorsand six dentists.

A range of business performance improvements have been

introduced, including raised productivity in SkyCargo hub

operations, merging the Skywards and Commercial Call centres in

UAE, reviewing Catering start ups in new stations, implementing

company-wide KPIs (Key Performance Indicators) and becoming the

company centre for airline benchmarking.

In collaboration with IT and business partners we have worked to

identify the processes leading to on-time departures to create

sustainable improvements in departure performance, as well as

streamlining Cabin and Flightdeck Crew-related rostering.

A major focus on airport related processes (Check-in, Boarding,

Transfer Desk and Stand Allocation) was undertaken to make

significant improvements ready for the new Dubai Terminal and

concourse facilities.

The department’s eVentures Group (eVG) has enjoyed success with

myTravelChannel.com which continues to grow as the leading

travel portal in the Middle East. The team is also developing “Daex”

hotels – this is the first online exchange for the automated delivery

and confirmation of hotel reservations in the world.

This year also saw the development of workshops that culminate in

a five-year business strategy and a series of key initiatives across

the group. To date Medical Services and Galileo Emirates have

participated and received approval for their strategic plans.

“Successful Together” is a comprehensive organisational development

programme being run in Emirates Airport Services to maximise

customer service and employee productivity throughout the

department. Once proven, the programme will be taken forward into

other areas of the Group. The Bright Ideas programme continues to

receive thousands of ideas per year which add significant value to

our bottom line or improve our services to customers.

Working with business units, the Customer Relationship Management

team initiates, influences and drives projects that encourage greater

customer focus. The in-flight Customer Information System is being

rolled out after a successful pilot phase involving IFS, CRM,

Skywards, Training, Service Delivery and Mercator designed to

enhance the on-board experience of our most valued customers.

Medical Services

Maintaining the health of our flight deck and cabin crew,

management and families is of paramount importance to the

group. As a result Medical Services runs a clinic which would have

pride of place in any medium sized town in Europe or elsewhere.

There are 13,000 patients on the books cared for by 14 doctors

(three others are on hand, too, but managing the administrative

and other duties associated with medical care),six dentists, 17

nurses and three hygienists.

Aviation medicine requirements continued to increase particularly

with regard to input on fatigue and alertness, incident

investigation, transport of sick patients and the provision of

onboard medical equipment.

Group Medical completed 4,225 GCAA (General Civil Aviation

Authorities) medicals for pilots and cabin crew, while several

hundred more pilots were examined on behalf of the Civil Aviation

Authorities of other countries.

We continuously conduct risk assessments on the medical

condition of our pilots in cooperation with the world’s leading

aviation consultants. There is also a pharmacy in the clinic for staff

and an in-house laboratory which helps to reduce the external

costs of investigations.

The workload of the Emergency Medical Technicians at the airport

remained constant. This service will be integrated with the employee

Primary Health Care and Aviation Medicine Clinic service to be

provided at the new Emirates Headquarters upon its completion.

Group Psychology continued to offer professional

counseling/psychotherapy services to employees and their

families. Some clinical evaluations were undertaken and neuro-

psychological assessments were also provided.

The department produced a brochure to aid the understanding of

psychometric test instructions for the Group and job profiles were

created using individual tests for various positions, to assist in

benchmarking candidates during selection.

A Post Retirement Medical Insurance plan was introduced to benefit

our retiring employees and eligible family members. This is likely to

be one of the major financial decisions that an employee will have

to make provisions for, and the guiding principle behind the

provision of such a facility is to help the employee manage the

transition, from their current company provided medical coverage

on to a platform which will enable them to maintain medical

coverage post-retirement.

35

More than 4,000 medicals were completedfor pilots and cabin crew.

Central Services

There are many group support departments contributing to a

trouble-free service for the company and the highest possible

hygiene level for the Emirates Group products. Central Services is

one such department being responsible among other things for

staff transportation and administration. Excluding the airside fleet

there are some 467 vehicles involved.

Central Services consistently achieved ontime pickup of 1,500 staff

and 600 crew daily and managed the parking at all group facilities.

There were 82,380 transfers of flight deck crew in 2004 compared

with 60,800 the previous year and 181,000 cabin crew transfers,

an increase of 30%. By introducing the electronic e-PACT module

the vehicle deployment for flight deck and cabin crew

transportation has been rationalised and has been extended to

monitor First and Business Class passenger pick-ups.

Mirroring the growth of the company, the mail has increased from

28,000 items handled per day to 37,000 – a 30% increase.

In support of Skywards, Central Services performs a fulfilment task,

registering a 47% increase in despatch to various tiers of members.

To ensure more reliable and sturdy end to end solutions, new

software was implemented with Central Services switching from

Access to an Oracle platform.

Procurement and Logistics (P&L)

In addition to helping to establish the seven new stations, Procurement

and Logistics worked closely with key line departments such as Airport

Services, In-flight Services and Flight Operations to leverage Emirates’

impressive growth and to seek unit cost reductions across the network.

This year saw the first full year of operations with our new handling

agent in Singapore, CIAS, and we also completed a major consolidation

of our ground handling suppliers in Australia and Frankfurt.

On the catering front, we concluded a global agreement with a

major inflight catering service provider which met with Emirates’

aim of maintaining an exemplary on-board product while

reducing our catering spend.

Emirates continues to be active in price negotiations with Airports

and Air Traffic control providers world-wide, both through the

International Air Transport Association and on a bilateral basis. This

year we focused on Air Traffic Control Charges levied by Euro

Control and assisted in industry negotiations in the United Kingdom,

Germany, Turkey and Romania. Throughout 2004 an ongoing

programme was implemented in the area of freight to achieve two

aims: consolidation of consignments over key trade lanes for the

Emirates Group and to increase the utilisation of SkyCargo as the

carrier of all consignments.

P&L was involved with Corporate Communications in the negotiation

of some high-profile sponsorship agreements during the year. Not

least of these was the 15-year deal with Arsenal Football Club for

naming rights of their new Stadium – the Emirates Stadium- as well

as an eight-year shirt sponsorship from the 2006-2007 season.

Electronic ordering software was rolled out to all Head Office-based

departments during the year. Additionally, more than 14,000

uniformed employees were given access to new software that

enables them to obtain a real-time look at their uniform items

entitlement and to directly place orders for the required items. P&L

has embarked on a programme to ensure that all buyers in the

department have a professional Chartered Institute of Purchasing &

Supply Management (CIPS) certification.

Finance

For the main operating departments of Finance, the past year has

been directed at the continuous improvement in unit costs through

automation, an ongoing focus on how we manage financial risks,

and an enhanced programme of development for our staff,

particularly UAE Nationals. Of particular note has been:

• The successful implementation of an internet payment gateway that

has provided enhanced protection against fraud for online sales.

• A seamless upgrade of the revenue accounting system RAPID to

enhance productivity.

• The roll out of an updated control framework for all overseas

offices which has enabled us to improve the monitoring of

activities and effectively manage financial risks.

• The launch of a new management accounting system that has

significantly improved the timeliness and relevance of financial

information, whilst improving the productivity of finance

staff involved.

• The use of a staff survey across all of Finance that enabled the

department to identify staff development required in order to

meet the future challenges of the business.

• The launch of a training programme for Finance aimed at

attracting more UAE Nationals into Finance.

The highlight of the year was the first-ever use of US Ex-Im bank

support for seven GE90 (General Electric) spare engines to raise US$129

million (Dhs474 million). This is a big step in diversifying our funding

sources even further. At the same time Emirates also raised US$ 110

million (Dhs404 million) to finance 15 Rolls Royce Trent spare engines

on a commercial basis. The entire package of US$ 239 million (Dhs878

million) was arranged and financed by Irish based, RBS Aviation Capital.

36

Group Support Serv ices

Another landmark saw Emirates complete a Japanese Operating

Lease for the financing of a new Airbus A340-500. This is the first

time any airline worldwide has successfully completed this attractive

low-cost financing on an A340-500 wide-body aircraft. The equity

on this financing was arranged by Tokyo based, Orix Corporation,

the biggest leasing company in Asia, and the debt was arranged

and financed by Bank of Tokyo Mitsubishi. The entire funding was

sourced from Japanese institutions which reflects our policy to

source funding from a wide range of international financial

institutions.

Emirates was successful in obtaining aircraft at attractive lease

rentals due to the general downturn in the aviation industry during

the last couple of years. We received four of these aircraft during

this year on operating leases - one B777-300ER each from

International Lease Finance Corporation and from General Electric

Capital Aviation Services, and two A340-300 from Boeing Aircraft

Holding Company. For the first time ever an A340-500 was

financed by a group of international banks to raise US$108 million

(Dhs396 million), which was arranged and funded by Standard

Chartered Bank, with Bank of Tokyo Mitsubishi and Lloyds TSB

Bank as co-arrangers.

Another major landmark was the first ever financing by Dnata

(through its fully owned subsidiary Kedma Holdings Pte Ltd) of

Singapore dollars 140 million (US$85 million) to acquire a 100%

stake in Singapore based, Changi International Airport Services.

This was a huge vote of confidence in Dnata as the entire

financing was sourced from banks based in Singapore. The

financing was arranged and funded by Standard Chartered Bank

with significant participation from DBS Bank, Overseas-Chinese

Bank Corporation (OCBC) and United Overseas Bank (UOB).

On the currency side, the year saw a continuation of US dollar

weakness, which provided opportunities to hedge some of our

non US$ currency exposures. Emirates proactively availed these

opportunities and secured financing in UK Sterling and Euros for

two A340-500s and four B777-300ER aircraft (three to be

delivered next year). This will provide a natural hedge to some of

our inflows from the UK and Euroland.

On the interest rate side, we saw the US Fed raising interest rates

seven times during the year to 2.75% from 1%. Going forward

interest rates are expected to rise further. Emirates has consistently

followed a balanced portfolio approach towards managing its

interest rate exposure, and following this policy we used fixed rate

financing for four aircraft out of eight delivered during the year.

The Group cash balance as at Mar 31, 2005 was robust at US$ 2.2

billion (Dhs8.2 billion). Underlining our twin objectives of

maintaining liquidity and very low credit risk, we optimised the

yield on our surplus funds by investing the cash surplus through a

mix of bank deposits and diversified structured products.

The year also saw the introduction of a system solution for treasury

operations management developed by SunGard Treasury Systems

Inc. based in the USA. The system will help us to effectively manage

volume growth, liquidity targets and treasury risks with valuable aid

in decision-making through comprehensive exposure and sensitivity

analysis. This will enable efficient automation of the Group's Treasury

processing requirements in cash management and banking, aircraft

financing, currency and interest rate risk management as well as cash

flow forecasting.

37

The successful implementation of an internet payment gatewayhas provided enhanced protection against fraud from online sales.

Emirates arranged the first-ever Japanese operating loan for an Airbus A340-500.

Group Support Serv ices

Finance

Information Systems (IT)

This was the year in which the business strategy for integrated IT systems took shape

thus paving the path for future IT integration for the Emirates Group. IT developed and

implemented a number of major applications in line with the agreed IT strategy for both

Emirates and Dnata. The drive of Emirates to introduce eTickets across its network and to

be fully compliant with interline partners resulted in Emirates offering eTickets in 47

Area Offices. These IT investments have dramatically improved the revenue

opportunities for Emirates. To monitor revenue performance and unique commercial

decision-making for Emirates Yield Management, IT delivered a software product called

Target.com.

A new revenue integrity tool, tightly integrated with the reservation system, was also

launched significantly enhancing the revenue protection capabilities of the Yield

Management function.

Sales force automation was a key focus with the introduction of "One Network" which will

provide major new benefits to the field sales staff of Emirates. Another significant

development was EasyMars for the Emirates Call Centres and its use is already yielding

benefits in the area of productivity and customer service.

Code-named ADOC, a new technical document management system was introduced by

Emirates Engineering for managing all of the Airbus technical manuals. The coming year will

see a finalisation of the strategy for the new operational system for Emirates Engineering.

Flight operations and Service Delivery saw new systems being introduced for Crew

rostering and bidding. For mobile staff the introduction of a cabin crew portal into a one-

stop electronic office, facilitated online connectivity and faster dialogue with the

workforce. Service Delivery management utilises this tool to seek feedback and involve

Cabin Crew in their decision-making process. For the Crew, the portal provides a platform

for interaction with management and for accessing Crew applications from across the

globe. Another significant development for Service Delivery was the Catering Portal. This

tool provides an online connection between Emirates Catering and its worldwide caterers

with the aim to improve productivity and agility in the process chain. The end-to-end

process for in-flight meal planning was automated.

38

Group Support Serv ices

Information Technology

Disruption management capability was enhanced with automation

of the connection matrix across Network Control Centre, Airport

and Reservation Services and the use of real-time EK flight status

into critical areas such as Crew Briefing Centre, Central Services

and Catering.

A new and improved Baggage Reconciliation System (BRS) was

introduced for the Airport Service functions of both Emirates and

Dnata. The next phase of BRS is planned to replace the existing

wired scan guns by wireless handheld scanning devices.

The coming year will see a major focus on mobile computing with

the introduction of mobile check-in as well as the deployment of

the Airport Activity Control System (AACS) for dispatchers. The

coming year will also see significant investments in enhancing the

Airport Services decision support system, as well as the trialing of

multi function Check-In counters at Dubai in preparation for the

new terminal hall.

Two critical areas of the Group which continued to attract high IT

investments are Emirates SkyCargo and Dnata Cargo. During the

year Chameleon, an in-house- developed integrated cargo ground

handling solution, went live for Dnata Cargo while Skylog, Emirates

SkyCargo’s ground handling system, followed within a few months.

Both Skylog and Chameleon are state-of-the-art integrated new

technology solutions and will be the core operational systems for

the next decade. An even larger strategic systems initiative has

been launched by Emirates SkyCargo and IT. This is the

development of an integrated new generation cargo reservations,

capacity management, pricing and operations system to replace the

current legacy SITA system. It will be the first of its kind in the

Cargo industry and will be ready for deployment by 2006.

In other areas Emirates Holidays began using a B2B system enabling

its agents to interact directly with the core operational systems and

generating a paper-less work environment. A new decision support

system also yielded major benefits to Emirates Holidays.

For Finance, the development and installation of a Treasury

Management system which automates deal management was a

major milestone. Finance also began using a brand new Monthly

Financial Report (MFR). The Group’s focus on managing its Direct

Operating Costs (DOCs) through a functionally rich system was

the basis for commencing automation in this area. Due to its

complexity major industry players continue to address DOCs

manually. Finance and IT have joined hands to tackle this

challenge and the project is well under way. Human Resources,

working with IT, launched an employee travel portal, TRIPS on the

Internet resulting in productivity improvements.

There was an increasing focus by HR to introduce self-service

functions for employees to enhance their interaction with HR

applications and reduce overheads. The Medical Department introduced

a new voice recording system and Central Services saw IT develop and

implement a fulfilment management system for Skywards.

As well as a new system to support the ambitious growth plans of

Dnata Holidays, another significant step was IT and Dnata

Agencies working together to achieve the Dnata Front Office

system in Saudi Arabia and Kuwait.

Within IT, major investments were made into new technology areas

with Java and .NET established as the two preferred development

environments. The coming year will see a continued focus on

improving productivity, delivery speed to the business and

upgrading domain knowledge. The coming year will also see the

introduction of new IT metrics and internal systems to better

measure and benchmark IT against other airline and non airline IT

departments, with a view to improving the quantity and quality of

delivery. The SEI-CMMI (Software Engineering Institute's Capability

Maturity Model) is a major step in that direction and will commence

in the next few months thereby helping IT gear up to help the

Emirates Group achieve its ambitious growth plans.

Technology Services (TS)

The newly-restructured organisation has changed its working

practices in line with the Information Technology Infrastructure

Library (ITIL) governance standards. Technology Services completed

its first ITIL benchmark using an independent third party and is

focused on delivering further year on year benefits as it adapts

increasingly to this model. We have already seen immediate benefits

through a 30% improvement in delivery of standard service requests

by our IT customer care centre.

In parallel, major improvement initiatives have been undertaken for

our core infrastructure. Our prime data centre has seen a 50%

expansion in size with a total upgrade and replacement of internal

infrastructure. This is part of a comprehensive Data Centre strategy

which will see a new facility provided next year to replace our

secondary data centre. The strategy is geared to deliver uninterrupted

availability of our critical systems with full disaster recovery capability.

The associated technology upgrades to meet the challenges of non-stop

operation have been no less challenging. In a landmark deal with Cisco

the entire network architecture for both data centres, comprising audit,

equipment provision, design services and monitoring, is being

replaced. The acquisition of the hardware has been structured as an

eight- year lease, the first deal of its kind in the region, providing both

competitive rates and protection against technology obsolescence.

39

The fibre connectivity between the data centres has also been upgraded providing true

any-to-any cross site connectivity for servers, storage and tape platforms. These initiatives

deliver the capability for any application to be delivered with a fully recoverable, high

availability 24x7 service.

In other initiatives we will complete the selection and implementation of an Enterprise

Management System (EMS) to guarantee early diagnosis and repair of faults before they

have a business impact.

We have commenced migrating our legacy UNIX applications to the LINUX platforms as part

of a three-year strategic plan to reduce cost and improve flexibility with several major

systems now in production on LINUX. This is being closely followed by a LINUX desktop

initiative to realise the same cost efficiencies across the organisation.

The increasing demands for mobility have been met through a trial rollout of a PDA based

“always on” email solution for our executives and a secure mobile laptop deployment for

our sales force leveraging the cheaper data communication now available via the Internet.

End user productivity has seen a significant boost through the completion of the

Microsoft desktop update and this is being closely followed by the upgrade of the server

and messaging platforms to further enhance and extend these benefits.

Significant effort was invested to enhance the resilience and automation in the Network

Control Centre which manages “day of operations” functions of Emirates. Advanced

infrastructure and site resilience was introduced for mission critical operational systems in

the Flight Operations area.

Mercator Sales

Mercator’s unrivalled experience in powering the Emirates Group’s success through

ground-breaking solutions, informed business consultancy and world-class technology

has provided a solid platform for Mercator Sales’ goal of becoming the leading airline IT

service provider. Meteoric growth coupled with a quickly expanding customer base led

Mercator Sales to restructure so that its customers can continue to be assured of the best

service and support. The department now has five distinct lines of business, covering

airline financial, air cargo, passenger and airport, airline process outsourcing and

business consultancy solutions.

Mercator had cause to celebrate last year after it won the biggest contract in its history. In a

multi-million dollar deal, Malaysia Airlines opted for the airline revenue accounting system

RAPID. Installation has already started, and once finished the number of coupons being

handled annually by the system across the entire customer base will top the 100 million mark.

During the year, RAPID was also successfully rolled out at Singapore Airlines. Another

high profile roll out at India’s Jet Airways rounded off a very busy year for Mercator’s

financial solutions business.

On the cargo front, Mercator’s Chameleon, the brand new cargo ground handling and

warehousing solution, has proved to be a real winner. The system has gone live at Emirates

SkyCargo and Dnata, and the benefits are already being felt.

40

Group Support Serv ices

Information Technology

Following on from this success, the Dubai Flower Centre and

Kuwait’s National Aviation Services have signed up for the product.

As substantial interest is gathering from airlines and ground

handlers in all regions, Chameleon is promising to be a star product

for the industry.

On the passenger and airport solutions front, Mercator’s hosted

reservations and departure control system went live at Kuwait

Airways. The frequent flyer solution, CRIS, also went live at Jet

Airways. CRIS is only the tip of the iceberg of Mercator’s Customer

Relationship Management (CRM) solution for the airline industry

which is an integrated suite of products which will deliver real

value to the end customer through the airlines’ capability to

manage the customer base.

Mercator Sales further strengthened its range of airline IT solutions

through the acquisition of the world’s leading aviation safety and

information reporting solution. Negotiations were concluded with

British Airways to take over WinBasis, the system used within the

safety departments of more than 120 airlines around the world.

Mercator now takes full responsibility for ongoing customer support

and product development. Airlines use the system to process their

safety-related incident reports, building an extensive database of

everything from the apparently trivial through to the most serious

in-flight emergency. The accumulated data is then analysed and

accurately pinpoints potential safety concerns.

41

Our prime data centre has seen a 50% expansion in size.

sponsorship of Arsenal and the Emirates Stadium made headline

news and our 2006 Fifa World Cup partnership promises to be

another major stepping stone to that elusive global prize.

Dnata is celebrating its 47th year in the UAE – and for this reason

it was necessary to refresh the brands and launch a major new

campaign. Advertising, PR and promotions combined to ensure

that the revamped Dnata received the attention it deserved from

UAE travellers.

Advertising

The Advertising unit drives brand identity, creative and media

strategy for all Emirates Group businesses, helping ensure values

are reinforced to customers across the network. The team's

overriding objective this year has been to expand communications

services to client departments, enabling these to be accessed and

delivered at internet speed.

Over 1,000 campaigns were executed across 40 brands and 50

countries, the common theme for which is “trial” - once customers

experience Emirates there is no going back. Our biggest route launch

ever, to New York, was activated by a massive worldwide awareness

campaign, using multiple media channels, a dedicated TV commercial

and a consistent creative product across markets. A focused campaign

on the Eastern Seaboard helped launch the Emirates brand in the USA,

where advertising dovetailed with PR and events to create enormous

buzz. We also introduced the Emirates brand in Vienna, Christchurch,

Glasgow, Shanghai and Seychelles, promoting inbound traffic via

above the line advertising and tactical launch offers. We produced six

new TV commercials this year, four for the FIFA World Cup 2006

sponsorship, running internationally across Europe, Asia and Africa.

Advertising exploitation of our other sponsorship properties was

stepped up with campaigns leveraging Chelsea, Arsenal, the Asian

Football Cup, Rugby 7s and our horse racing partnerships.

Corporate Communications

Corporate Communications works with all departments to present

Emirates to clients, travel agents and media as a stylish, different

way to fly, highlighting all the extra benefits which make us a

market leader. Paradoxically, the more successful the airline

becomes, helped by our advertising campaigns and sponsorships,

the more Media Relations have to continue to explain to a

sometimes sceptical world of TV, radio and press journalists that

the profit has not been shovelled from some government gold

store but has been earned honestly, without any subsidies or

below-the-table assistance.

Our objective for Emirates is to build a global brand – and there are

indicators that this is happening. In the UK our brand appeared

ahead of all foreign airlines in a recent popularity poll. The airline

regularly wins more than 10 international awards each year. We

have won awards for TV, press and web advertising.

“www.emirates.com” our main website jumped up the most widely

used sites list to 7,000th in the world (which may not seem much

until it is remembered that there are several billion sites on the

worldwide web). Perhaps more significantly is the popularity of the

“www.emiratesgroupcareers.com” site which attracted more than

200,000 applicants for jobs underlining the strength of the brand.

Our outdoor advertising has given us some unique “firsts”, our

42

The Emi rates Group

Corporate Communications

Innovative outdoor billboards (left and below)promoted Emirates in Dubai and aroundthe network.

A new brand positioning and advertising campaign was developed

for Dnata, introducing the “Rest Assured” tagline to key internal

stakeholders and customer groups in the UAE and beyond.

A new brand platform and campaign was successfully introduced

for the Mercator range of IT products amongst airline and airport

customer segments.

Our industry-leading range of sales and service collateral for

Emirates, SkyCargo, Dnata, Skywards and Emirates Holidays helps

us to stay engaged with key customer groups, whilst always

reinforcing the core values of the Emirates Group. We continue to

extend the Emirates’ brand identity across retail and airport touch

points, including check-in and lounges.

The Advertising team has provided consultancy services to several

new businesses and Joint Ventures within the Group this year,

including CIAS Singapore and Dnata's regional divisions.

We continue to benefit from a networked roster of quality

advertising agencies, rather than a “lead” agency. Brand strategy

and creative direction is driven in-house, with a genuine

partnership of dedicated and well briefed agency staff providing

the eyes and ears of the Emirates brand globally. Regional “clusters”

of agency teams, drawn from the world’s six leading marketing

services companies, help balance global themes with local

messaging and enable us to exploit creative and media synergies.

We continue to invest in our agency relationships heavily, in the

same way as we invest in our travel trade partnerships, believing

this to be an effective way to motivate, share knowledge and,

ultimately, maintain our creative edge over less nimble competitors.

The Corporate Communications extranet and brand management

tool, EmPower, provides a unique online workplace for the roster

of advertising, PR and branding agencies across the Emirates

network. The system helps to absorb production of, input to and

administration of all campaigns whilst activating knowledge and

creative share. EmPower has quickly developed into an online

creative marketplace for all Emirates Group brands. Work has

begun on building the next generation EmPower, to be launched

in September 2005.

Our media planners and buyers continue to gain economies of

scale from an expanding, and increasingly segmented, marketing

communications reach via the higher profile of the Emirates brand.

Media buys at the international and local level are scrutinised for

synergies and we continue to drive down cost per thousand via

targeted offers. Some spectacular media innovations – including

covering the world’s tallest residential tower with a billboard, the

region’s first “sliding doors” billboard for the A340-500 mini suites

and lighting up the Sydney skies with tactical messages have

created a local buzz and international media exposure.

Return on investment is an ongoing focus for all advertising

campaigns and we invest a modest yet significant proportion of the

budget into measuring the impact of specific campaigns via noting

studies, pre- and post- surveys plus brand tracking surveys in key

markets such as the UK, Germany, UAE, China and Australia.

Our rapidly expanding global reach, combined with higher channel

volumes mean that our media sales operation continues to grow,

helping offset media investments elsewhere.

Internet

The Internet Communications team continues to extend the Emirates

brand online and to support all business units in boosting e-

commerce and reducing cost of sale. The rise in traffic to the

flagship site, www.emirates.com, has been remarkable and the site

now enjoys an average of 60,000 unique visitors per day.

43

Over 1,000 advertising campaignswere handled during the year.

New York inaugural advertisement.

Over 30 local variants of emirates.com engage with all our key

markets and help channel tailored offers and tactical advertising.

Sites now exist in English, French, Russian, German, Italian,

Japanese, Chinese, Arabic and Korean and there was a 38%

improvement registered in the Alexa World Ranking. Dedicated

travel agent websites support our trade engagement strategy whilst

reducing pressure on call centres.

The Group’s recruitment site emiratesgroupcareers.com has been a

continued success, ensuring all applications are online and cost per

hire minimised. The web is also increasingly being used as a timely

tool for internal communications, boosting brand engagement by

geographically dispersed staff in a cost-effective manner. The latest

online advertising technologies are used for all route launch and

tactical online campaigns including eye blasters, space banners,

flash banners and targeted e-mail campaigns.

Promotions

Emirates continues to build its sponsorship portfolio through

various sports around the world including horse-racing in Australia

(Gold Coast Turf Club), rugby in Dubai, South Africa, London and

Bordeaux, cricket (ICC sponsorship, Lord’s Taverners) and golf in

Munich, Auckland, Shanghai and Glasgow.

This year was a year for key announcements for Emirates. A major

sponsorship announcement that helped Emirates receive world-

wide exposure was when Emirates Airline and Arsenal Football Club

signed the biggest club sponsorship in English football history,

worth some £100 million (Dhs662.2 million). The agreement

provided Emirates with naming rights to the club’s new £357

million stadium, presently under construction. The new stadium,

seating 60,000 spectators, will boast cutting-edge facilities. For

the next 15 years and with immediate effect it is known as the

Emirates Stadium.

Emirates will also take over as the club’s title sponsor – including “Fly

Emirates” shirt sponsorship – for eight years, starting from the 2006-

2007 season, the first playing season in the new Emirates Stadium.

In June 2004, Emirates announced the creation of Emirates Team

New Zealand and its challenge for the 32nd America’s Cup, the

world’s premier yacht racing event, in 2007. This new major

sponsorship propelled Emirates to the front row of the sailing

world. Victory in Louis Vuitton Act 2 (Valencia, October 2004) and

other good performances across the series saw Emirates Team New

Zealand crowned as 2004 America’s Cup Season Champion.

Emirates renewed its title sponsorship for the Collingwood Aussie

Rules Football Club, Melbourne. One of the most high profile

sponsorships this year was when the opportunity came up to

sponsor the Melbourne Cup, it made sense to seize it! We obtained

the rights and the race day was named “Emirates Melbourne Cup

Day”. The branding at the Flemington racecourse was seen by

millions of TV viewers all over Australia and world-wide. We also

renewed our commitment to several famous events including the

world’s richest horse race, the Dubai World Cup, and the PGA

European Tour’s Dubai Desert Classic which was broadcast to an

estimated 50 million homes worldwide.

Exciting plans continue to be formulated for the FIFA World Cup

2006 to maximise our commitment as Official Partner, which

includes various events and tournaments over the two years

leading to the Finals in July 2006.

But it was not all sports promotions, for Emirates as usual

participated in the ITB fair in Berlin showcasing the A340-500 first

class suite, and at the World Travel Market in London. Other

exhibitions this year included Emirates’ presence with stands at the

Ferien Messe in Vienna, at MATTA in Kuala Lumpur, BIT in Milan,

Top Resa in Deauville while Emirates Skycargo’s participated at

44

The Emi rates Group

Corporate Communications

Dramatic images featured in our Seychelleslaunch advertisements.

A new campaign “Rest Assured” was developed for Dnata.

cargo shows such as Air Freight Asia (Bangkok), Air Cargo China

(Shanghai) and Air Cargo Forum (Bilbao). Dnata exhibited at the

Arab Travel Market, Dubai.

On the cultural scene Emirates continued to be principal partner of

the three major symphony orchestras in Australia – Sydney,

Melbourne and West Australia. Emirates was key sponsor of the

Dubai International Film Festival in December 2004, a brand new

event that promises to be a regular in the social calendar. Emirates

Road Shows for the travel trade and inaugural gala parties for VIP

guests were held during the course of the year to herald the

addition of new destinations such as Shanghai, Vienna, Glasgow,

Christchurch, New York and Seychelles.

The souvenir shops continue to flourish and our revenue for the two

shops in Dubai for 2004/2005 was Dhs1.7 million. We are looking

forward to taking over brand new premises in Emirates Group

Headquarters in May 2005 which will allow us to continue the growth.

One of our biggest achievements for 2004/2005 was in distributing

the brand to Dubai Duty Free (DDF) who are now selling our T-shirts,

caps and aircraft models in the Departures Concourse.

The year ahead holds some exciting prospects and we intend to sell

our merchandise at the 2005 Dubai World Cup and the 2005 Dubai

Airshow. We also expect to launch a fully operational website

during 2005 which will allow customers to purchase online our

branded materials. The Promotional Support unit continues to

service the entire network as well as all of the Group brands who

require give-aways and promotional material. In addition, we

support all of the major events that Emirates sponsors.

Media Relations

“Emirates Group has emerged as one of the fastest growing and

most feared competitors in the global airline industry.” - The Wall

Street Journal, 11/1/2005.

This opening sentence from a front page story by WSJ editor

Daniel Michaels under the headline “From Tiny Dubai, an Airline

with Global Ambition Takes Off” epitomises the growing

recognition by the world’s leading media of Emirates’ coming of

age as a major player in the global airline industry.

Earlier and half-a-world away, the Australian Financial Review’s

aviation editor Tansy Harcourt had reached a similar conclusion. In

a story headlined “Sky’s No Limit for Emirates,” Harcourt wrote:

“The message to competition is that Emirates is here to stay, in a

big way.” AFR, 20/8/2004.

Paul Betts of the Financial Times seemed to agree. He wrote:

“Emirates... turns itself into the world’s largest operator of long-

haul airliners” - FT European edition, 2/11/2004.

Press comments such as those are indicative of the success of the

Media Relations team’s efforts to increase media awareness of the

company’s distinctive business model, and to support the airline’s

and Group’s goals by generating positive media coverage about

their initiatives and strong momentum.

Major Media Relations projects included the successful launch of

seven new routes to the new destinations’ media. Fifteen news

conferences - and participation of Dubai-based journalists in some

of the inaugural programmes - were part of the communications

plan rolled out on behalf of the new flights, as well as Dubai

orientation tours for press groups from these destinations.

45

Emirates is probably the most high-profilesports sponsor in the world.

Fifa World Cup 2006advertisement.

Emirates Team New Zealand. ICC Elite Umpires are sponsored by Emirates.

Helped by its global network of 35 PR agencies, Media Relations used those developments

to strengthen recognition of Emirates as one of the world’s fastest growing and most

dynamic airlines, thanks to its steady policy of profit re-investment, to deliver the highest

level of customer service at competitive prices.

Other significant communications plans executed by Media Relations were those to

maximise coverage of the Emirates participation in the premiere of the new Airbus A380

in Toulouse, the hosting of the bi-annual convention of the French association of aviation

writers, a media information campaign in support of Emirates’ promotions for the Dubai

Shopping Festival targeting the Indian sub-continent’s markets and sub-Saharan Africa, a

five-country series of news conferences attended by 250 journalists to help promote the

Mauritius destination in the Middle East, the media launch of Al Maha’s new spa and

conference facilities and a press programme to take full advantage of Emirates SkyCargo’s

announcements of new services at the Air Cargo Forum in Bilbao, Spain.

In total, in the twelve months through the end of March 2005, Media Relations hosted or

facilitated the visits of an estimated 350-plus journalists to Dubai and their exposure to

different aspects of the Group’s operations, besides handling hundreds of media inquiries

about the company’s activities.

For Dnata, Media Relations were involved in three major announcements: the acquisition

of the majority shareholding in Changi International Airport Services, the launch of the

new Corporate Campaign “Rest Assured” and the Chairman’s announcement at Arab Travel

Market of regional expansion plans.

Dnata Cargo was featured in the press with the launch of the express handling service for

perishables and the expansion of the Freezone Logistics Centre.

The sharing of news about Emirates’ business initiatives helps employees to make an

informed contribution to the Group’s goals and promotes team spirit. The Media Relations’

Internal Awareness mission is the selection and efficient distribution of such information,

in close cooperation with the different divisions and departments, to ensure that it

reaches all of the target employee groups throughout the Company.

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The Emi rates Group

Corporate Communications

Below: The mammoth Emirates super jumbo-shaped stand won the “Best in Show” (MiddleEast section) at the ITB Trade Fair Berlin.

Among the special projects coordinated by the Internal Awareness

unit, which oversees the regular production of 16 print or electronic

publications for staff, was the introduction of a new, revamped Safar

in October of 2004, and the launch of two brochures on the new

Industry Travel STARS facility and HRDirect Self Service, as special

Safar supplements in July and November, respectively.

Internal Awareness also initiated the construction of a new SMS

Broadcast Messaging System which makes it possible for the

company’s management to distribute urgent communications to staff

by sending text messages directly to their mobile phones. The new

system was activated in February 2005.

Passenger Communications and Visual Services

Passenger Communications and Visual Services makes an

important contribution to product development and presentation.

The introduction last year of the new 500 channel ICE (information,

communications and entertainment) system on the A340-500 has

achieved greatly improved levels of customer satisfaction. During

the year four Boeing 777s were retrofitted with the ICE system and it

is also fitted as standard on the new Boeing 777-300ER aircraft

which started to join the fleet in March 2005. By the end of March,

14 aircraft in the fleet offered ICE, representing 20% of the total

passenger fleet and this figure will rise to nearly 40% during the

next financial year.

A WiFi email service was launched on the A340-500s allowing

passengers to connect to their email accounts using their personal

WiFi equipped laptop. Emirates was the first airline in the world to

receive an aircraft with WiFi line fitted as standard and the service

is proving popular with passengers on the long A340-500 flights

to New York and Australia.

Further enhancements to the legacy in-flight entertainment

systems are planned during the coming year to maintain

competitiveness and continually improve the passenger product.

Emirates also manages SriLankan Airlines’ in-flight entertainment and

it was pleasing for SriLankan to win the “Best Overall In-flight

Entertainment" in the small airline category at the recent World Airline

Entertainment Association Awards for the second year running.

SriLankan was also voted the “Best Short-haul entertainment" and

"Best Long-haul entertainment" beating off stiff competition from

other major carriers.

On Emirates, In-flight advertising revenues grew by 10% in an

otherwise tough year for advertising sales, reflecting advertisers

strong attraction to the Emirates brand and growth of Dubai as a

major market.

During the year, Visual Services produced a large number of

media items and videos and managed technical production at most

commercial events such as the launches to New York, Vienna,

Shanghai, Seychelles and Glasgow. A new edition of the Emirates

World staff DVD was produced, communicating to staff the

airline's plans and vision. Visual Services also produced a film for

Al Maha Desert Resort and another encouraging UAE nationals to

join Emirates Cadet Pilot programme.

47

Media Relations hosted more than350 journalists in Dubai during the year.

The Emirates Stadium, London. ICE system is being fitted throughout the fleet.

Facilities/Projects Management Department

The Facilities Management Department (FMD) is responsible for 175,000 square metres of

commercial space in Dubai ranging from offices, shops, warehouses and workshops to

lounges and airport facilities. Its property portfolio also includes 6,200 villas and apartments.

Residential accommodation is provided to expatriate staff in senior management grades,

pilots, engineers and cabin crew. We accommodate 5,270 staff and their families and this

number is increasing at the rate of at least 30 staff and families per week as the Company

recruits to meet its manning requirements. The Company owns 1,443 units of accommodation

leased to junior grade, and is able to control the rents to ensure that our staff obtain

affordable accommodation in what has become a very upward moving rental scenario.

On the project management side the FMD is managing some Dhs2.5 billion worth of new

projects such as the Engineering Facility, Group HQ building, Crew Training College,

Security building, warehousing and several building extensions.

Group Safety

Key indicators in the year 2004/2005 reflect that the Group’s efforts to reduce operational

risk, and the costs associated with incidents and accidents, have been rewarded with overall

improvements in safety performance. A combination of increased awareness, conformity

to standards and sound working practices, in line with the requirements of the integrated

Safety Management System, are seen as the major contributors to this outcome.

Likewise, improved data capture and reporting has enforced Group Safety’s initiative to

further develop a tool that accurately accounts for the costs of aircraft ground damage –

estimated by the industry at more than US$2 billion per annum worldwide. This project

has produced a model that is innovative and expansive, having applications that are wide

ranging with uses in Finance, Legal, Network Control and Engineering.

A new operational risk analysis model that utilises the functions of dependency modelling has

been introduced. Network wide, Group Safety has launched a video safety campaign, “Safety

In Your Hands” which was distributed to all stations with a view of further educating and

increasing awareness among all Emirates and Dnata staff, Cargo Handling Agents, Ground

48

The Emi rates Group Ali Mubarak Al Soori, Senior Vice President Chairman’sOffice and Facilities/Projects Management discussingthe new Emirates Group Headquarters with developers.

Handling Agents, Engineering and all other Service Providers, in the

safe handling of our aircraft. In association with other operators,

Group Safety is currently leading a project involving 45 Ground

Handling companies’ world wide (IAHA) to establish an industry

benchmarking system for aircraft ground damage and personal

injury rates.

The IATA Operational Safety Audit (IOSA) was formally accepted

by the FAA in July 2004 as an independent safety audit

programme and as a substitute for code share audits. Emirates,

represented by Group Safety, being one of the 25 active airline

members of the IOSA Oversight Committee (IOC), subsequently

became one of the first major carriers to be successfully audited

against this newly created internationally recognised, operational

safety standard and now awaits full IOSA accreditation.

Fire prevention awareness programmes remained a focus

throughout the Group further reducing the low baseline of facility

fire rates. The Group’s many construction projects remain in the

forefront of fire protection engineering. Two of these high profile

projects are the New Engineering Centre and the Emirates

Headquarters building which in themselves incorporate new designs

and applications requiring innovations in protection systems.

Group Security

Unfortunately, it is endemic of the airline industry in the 21st

century that the safeguarding of customers, staff and assets is one

of the highest priorities and we are continuing to reinforce our

security programmes throughout the network.

An example of the skills of our vigilant airport unit was their

prevention of 4,500 passengers carrying improperly documented

passports from boarding our flights.

Such is the level of experience attained by the members of this

unit that it was awarded an indefinite Approved Gate Status by UK

Immigration – a distinction which recognised the level of

professionalism Emirates offers for document verification.

At the same time the Cargo Security and Aircraft Protection Unit

conducted cabin search, ramp security and other surveillance

and checks. A multi-faceted organisation, Group Security’s

Aviation Security Operations Unit helped to successfully launch

the New York destination developing an automated screening

system, with Mercator, for the US Transport Security

Administrations Selectee and No-Fly lists.

Following an audit, the Emirates Security Programme was also

given the thumbs-up by the GCAA and certified as having met the

requirements of ICAO and the UAE’s National Aviation Security

Programme. The Australian Department of Transportation and

Regional Service also granted its approval to the programmes

developed by Group Security.

Group Security was involved in training for ground staff and cabin

crew developing a special programme for disruptive passengers.

The “human factor”, not just machines, is the most vital component

for any security sub-system and in recognition of this Group

Security has jointly developed with the Edith Cowan University of

Western Australia, a Diploma programme in Aviation Security

Management which takes 12 months to complete. The first

graduation from this course has already taken place.

Transguard continued to remain profitable and now offers one of

the largest and the most sophisticated cash management system in

the Gulf. It has a fleet of 34 armoured cars.

49

Transguard has a fleet of more than 30 armoured cars. Transguard provides entrance security for the Dubai Desert Conservation Reserve.

Legal

In what has been a busy year for Group Legal, the department has registered Emirates

Group trademarks in 79 countries, co-ordinated and filed US regulatory applications

necessary for operations to the US and worked on agreements in respect of Emirates’

sponsorship deal with Arsenal Football Club and the Dubai International Film Festival 2004.

This was in addition to the naming sponsor agreement with Emirates Team New Zealand

for the America’s Cup regatta in Valencia in 2007.

The department was also involved with drafting and negotiating an agreement between

Emirates and General Electric International Inc., regarding the design, construction and

commissioning of an engine test facility in Dubai.

With regard to Emirates’ fleet expansion, Group Legal drafted agreements for purchase

of three A310 aircraft from Airbus and the subsequent freighter conversion by (EFWC)

Elbe Flugzeug Werke Company. Group Legal Specialists were also involved in all aircraft

financings and re-financings (five in total for the year) and engine financings (two),

one of which was Emirates’ first ever financing deal with Ex-lm Bank.

Internal Audit

Internal Audit has played a key advisory role in a range of business process initiative

across the Group, from electronic funds transfer, e-ticketing and IT security to the roll-out

of a financial control framework designed specifically for overseas locations.

The department’s business-focused structure enables it to provide direct assistance to

business managers in documenting key processes and in integrating analytical tools and

exception reports, or managing significant risks on an on-going basis.

Regular knowledge sharing with other airlines and global professional bodies is actively

encouraged by Emirates Group Internal Audit, which has been invited to chair the

International Association of Airline Internal Auditors (AAIA) in 2005.

The Emirates Award for the best candidate from the UAE at the annual Certified Information

Systems Auditor examination has been introduced to encourage the development of the

audit profession in the region. This has now been extended to the Certified Information

Security Manager examination as well. More than 90% of the audit team now hold at least

one internationally recognised professional qualification in the field.

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The Emi rates Group

SriLankan

Following last year's record profits, SriLankan faced two enormous

challenges this year: the devastating effects of the tsunami,

together with the unprecedented rise in the cost of fuel.

With SriLankan playing a pivotal role in handling and processing the

huge international relief effort at Colombo International Airport, the

country is beginning to recover from the effects of the tsunami.

Whilst this will take time, visitor arrivals have already started to

increase and the Company is cautiously optimistic for a return to

profitability in 2005/6.

The addition of two more Airbus A320 aircraft has allowed

SriLankan to expand its profitable Indian network to 77 services

per week, serving 10 destinations.

A new US$20 million Flight Kitchen is under construction at

Colombo International Airport, which will more than double the

existing unit's capability to cope with growing demand when

completed in early 2006.

More international awards came SriLankan's way, with the airline

sweeping the board at AVION 2004, winning three awards including

"Best Overall Inflight Entertainment" for a fleet size of less than 20

aircraft. Once again Skytrax judged SriLankan as "Best Airline

Central Asia 2004", for the fourth consecutive time, and TTG Asia

also awarded the airline "Best Airline South Asia 2004".

The Emi rates Group

51

Skytrax again judged SriLankan as “BestAirline Central Asia 2004”.

A SriLankan A340-300. SriLankan wins awards for the quality of its inflight service.

The Emi rates Group

Corporate Structure 2004-2005GroupChairman His Highness Sheikh Ahmed bin Saeed Al-MaktoumVice Chairman and Group President Maurice FlanaganPresident Emirates Airline Tim ClarkPresident Dnata and Associated Companies Gary ChapmanPresident Group Support Services Dermot MannionSenior Vice Presidents

Chairman’s Office & Facilities Management Ali Mubarak Al SooriCorporate Communications Mike SimonSafety and Standards Mohammed A AlKhajaSafety Michael QuinnGroup Security Abdulla Al HashimiInternal Audit Neeraj Kumar

EmiratesPresident Tim ClarkExecutive Vice President - Commercial Operations Worldwide Ghaith Al GhaithExecutive Vice President - Engineering and Operations Adel Al RedhaSenior Vice Presidents

Emirates SkyCargo Ram C MenenDestination and Leisure Management Hans HaenselEmirates Airport Services Dale GriffithDubai Airport Development Ahmed KhooryEmirates Airport Services – Dubai Mohammed MattarPlanning, International and Industry Affairs Tony TayehService Delivery Terence DalyCommercial Operations - The Americas Nigel L PageCommercial Operations - Europe Keith LongstaffCommercial Operations - East Asia & Australasia Richard VaughanCommercial Operations - Gulf, Middle East & Iran Hamad ObaidallaCommercial Operations - Africa Nasser Bin KherbashCommercial Operations - West Asia & Indian Ocean Nabil SultanCustomer Affairs and Service Audit Richard NgRevenue Optimisation Scott Alan McMahen

Dnata and Associated CompaniesPresident Gary ChapmanExecutive Vice President Ismail Ali AlbannaSenior Vice Presidents

Dnata Agencies Rashid Al NooriDnata Airport Operations Tom LewisDnata Airport Projects Derek SwanDnata Cargo Jean Pierre De PauwCorporate Development Khaled Al KamdaGalileo Emirates Naz NizariAssociated Companies Stewart Angus

Group Support ServicesPresident Dermot MannionExecutive Vice President - Human Resources Abdulaziz Al AliSenior Vice Presidents

Medical Services Cliff WebsterPerformance Development Martin TomlinsonCorporate Treasury Riyaz PeermohamedFinance Nigel HopkinsInformation Technology Joshua KoshyProcurement & Logistics (Non-Aircraft) Saeed MohammedLegal Alistair Dunn

54

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The Emi rates Group

Operating statistics

2004-05 2003-04 2002-03 2001-02 2000-01

Consolidated financial statements

Total revenue (AED’000) 18,113,085 13,286,331 9,709,749 7,274,658 6,417,372Total expenditure (AED’000) 15,678,183 11,602,094 8,749,606 6,783,795 5,970,725Operating profit (AED’000) 2,564,492 1,748,756 1,000,511 625,794 665,653Net profit (AED’000) 2,339,571 1,573,511 906,747 468,231 421,825

Airline operating statistics

Performance indicatorsYield (Fils per RTKM) 192 181 169 166 174Unit cost (Fils per ATKM) 111 107 111 108 114Breakeven load factor (%) 58.2 59.0 65.4 65.1 65.5

FleetNumber of aircraft 69 61 46 38 35Average age (months) 55 46 36 37 36

ProductionDestination cities 76 73 64 57 55Overall capacity (ATKM million) 13,292 10,207 7,350 5,718 4,761Available seat kilometres (ASKM’000) 68,930,198 54,656,790 41,336,554 32,629,532 27,254,862Aircraft departures (number) 72,057 58,763 45,452 38,914 35,310

TrafficPassengers carried (number) 12,528,761 10,441,345 8,502,894 6,765,113 5,718,818Passenger seat kilometres (RPKM’000) 51,398,393 40,110,375 31,660,547 24,230,533 20,468,473Average distance flown per pax (Kms) 4,102 3,841 3,724 3,582 3,579Passenger seat factor (%) 74.6 73.4 76.6 74.3 75.1Cargo carried (Kg’000) 838,400 659,816 525,188 400,569 335,194Overall load carried (RTKM million) 8,649 6,629 5,145 3,908 3,310Overall load factor (%) 65.1 64.9 70.0 68.3 69.5

EmployeeAverage employee strength (number) 15,858 12,804 10,507 8,697 7,571Capacity per employee (ATKM) 838,202 797,156 699,487 657,513 628,850Load carried per employee (RTKM) 545,392 517,727 489,627 449,331 437,148Revenue per employee (AED) 1,103,117 993,171 883,632 793,642 808,469Value added per employee (AED) 370,380 355,197 317,063 286,484 299,539

Emirates

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The Emi rates Group

Operating statistics

2004-05 2003-04 2002-03 2001-02 2000-01

Consolidated financial statements

Total revenue (AED’000) 1,414,031 1,093,948 959,965 820,131 740,988Total expenditure (AED’000) 1,153,624 920,169 818,236 685,364 631,460Operating profit (AED’000) 240,950 158,628 123,600 112,776 79,312Net profit (AED’000) 260,407 173,779 141,729 134,767 109,528

Average employee strength (number)* 8,196 7,186 6,253 6,389 5,887Revenue per employee (AED)* 154,584 150,495 150,956 125,290 124,431Value added per employee (AED)* 120,433 116,071 112,787 98,133 96,068

Airport performance indicators

Aircraft handled (number)* 93,004 79,932 69,322 59,994 60,689Passengers handled (number)* 22,389,218 19,130,592 16,452,152 13,805,735 12,793,174Cargo handled (Kg’000)* 457,869 405,906 399,193 635,298 572,778

Employee

Average employee strength (number)*Airport operations* 5,563 4,601 3,885 3,764 3,555Cargo* 894 849 811 1,161 1,027

Aircraft handled per employee (number)* 17 17 18 16 17

Passengers handled per employee (number)* 4,025 4,158 4,235 3,668 3,599

Cargo handled per employee (Kgs)* 512,158 478,099 492,223 547,199 557,720

*These figures exclude subsidiaries.

Dnata

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The Emi rates Group

Financial statistics

2004-05 2003-04 % Change

GroupTotal revenue* AED (million) 19,091.8 14,012.8 36.2 Total costs* AED (million) 16,396.5 12,154.8 34.9 Operating profit AED (million) 2,805.4 1,907.4 47.1 Net profit AED (million) 2,600.0 1,747.3 48.8

Operating margin* % 14.9 13.8 1.1 ptsNet margin* % 13.8 12.6 1.2 pts

Group liquid funds AED (million) 8,171.6 7,277.6 12.3 Shareholders’ funds AED (million) 8,768.7 5,763.7 52.1 Return on shareholders’ funds % 35.8 34.3 1.5 pts

Value added AED (million) 7,249.1 5,676.0 27.7

EmiratesTotal revenue AED (million) 18,113.1 13,286.3 36.3 Total costs AED (million) 15,678.2 11,602.1 35.1 Operating profit AED (million) 2,564.5 1,748.8 46.6 Net profit AED (million) 2,339.6 1,573.5 48.7

Operating margin % 14.3 13.3 1 ptNet margin % 13.1 12.0 1.1 pts

Value added AED (million) 6,181.3 4,835.5 27.8

DnataTotal revenue AED (million) 1,414.0 1,093.9 29.3 Total costs AED (million) 1,153.6 920.2 25.4 Operating profit AED (million) 241.0 158.6 51.9 Net profit AED (million) 260.4 173.8 49.8

Operating margin % 17.3 14.7 2.6 ptsNet margin % 18.7 16.1 2.6 pts

Value added AED (million) 1,068.2 841.0 27.0

*After eliminating inter company transactions of AED 435.3 million in 2004-05(2003-04: AED 367.4 million), comprising operating income / expense ofAED 434.9 million (2003-04: AED 366.9 million) and interest income / expenseof AED 0.4 million (2003-04: AED 0.5 million).

The financial year of the Emirates Group is from 1 April to 31 March.Throughout this report all figures are in UAE Dirhams (AED) unless otherwisestated. The exchange rate of the Dirham to the US Dollar is fixed at 3.67.

The percentage change has been based on the exact figures before roundingin respect of the two financial years.

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The Emi rates Group

Group net profit for 2004-05 was AED 2,600 million, recording an impressive 48.8% growth comparedwith the previous year (2003-04: AED 1,747 million).

Group operating profit, at AED 2,805 million, was AED 898 million better than last year. The operatingmargin of 14.9% was 1.1 points better than last year.

Return on shareholders’ funds reflected an increase to 35.8% as compared with 34.3% in 2003-04.

Total Group revenue in 2004-05 was AED 19,092 million, a considerable increase of AED 5,079 million(36.2%) over the previous year. Group revenue consisted of operating revenue of AED 18,540 million andother income of AED 552 million (2003-04: AED 13,542 million and AED 471 million).

All inter company transactions between Emirates and Dnata have been eliminated in computing Group revenue.

Emirates operating revenue increased by AED 4,765 million (37.1%) to AED 17,620 million reflecting highercapacity and traffic, together with improved yields.

Passenger revenue at AED 12,991 million was 37.3% higher than last year, while cargo and related revenuegrew by 42.8% to AED 3,453 million. Transport revenue constituted 94.1% of Emirates’ total operating revenue.Dnata’s operating revenue increased by 28.4% over last year to AED 1,355 million.

Group operating costs at AED 16,054 million were AED 4,133 million (34.7%) up over last year.

Total Group expenditure including financing costs and taxation was AED 16,397 million, a rise ofAED 4,242 million (34.9%) over last year in line with the increase in total Group revenue.

The increase in Emirates’ costs came mainly from higher fuel and oil (up AED 1,647 million or 100.9%),aircraft operating lease costs (up AED 526 million or 38.9%), employee expenditure (up AED 447 million or19.8%) and sales and marketing costs (up AED 432 million or 29.5%).

Group cash generated from operating activities was AED 4,168 million, an increase of AED 1,318 million(46.3%). Emirates contributed AED 3,798 million of the cash generated from operating activities whileDnata generated AED 370 million.

Group operating cash margin washealthy at 22.1%, up 1.5 points ascompared with the previous year.Emirates’ operating cash margin at21.2%, increased 1.7 points from19.5% in 2003-04.

Group cash generated from operatingactivities stood at 160.3% of net profitwith Emirates at 162.3% and Dnata at142.0%.

Emirates’ cash generated fromoperating activities covered 64.0%(2003-04: 55.9%) of current liabilitiesat 31 March 2005. Dnata’s cashgenerated from operating activitiescovered 84.3% (2003-04: 84.2%) ofcurrent liabilities at 31 March 2005.

Income

Revenue

Expenditure

Cash flow

05000 4000 3000 2000 1000 1000 3000 500040002000

AED million

Utilisation Inflow

Net cash provided from operating activities

Net cash used in investing activities

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash flow

59

The Emi rates Group

Group capital expenditure for 2004-05 was AED 3,067 million, 95.5% higher than the previous year’s levelof AED 1,568 million. Aircraft, spares and spare engines comprised 53% of the total capital spend,including disbursements for aircraft deliveries during the year and progress payments for future deliveries.

GroupAt 31 March 2005, the Group’s cash funds (including held to maturity cash investments of AED 349 million)improved by 16.5% to AED 8,521 million (USD 2,322 million). The Group invested surplus funds in a mix ofhighly rated bank deposits and diversified structured products. The overall interest income earned yieldedan effective rate of 2.43 % (2004: 1.89%), reflecting the increase in prevailing rates.

Group shareholders’ funds at 31 March 2005 was AED 8,769 million (USD 2,389 million), up by 52.1%compared to AED 5,764 million (USD 1,570 million) at 31 March 2004.

EmiratesAt 31 March 2005, Emirates’ cash position (including held to maturity cash investments of AED 220 million)improved by 16.5% to AED 7,549 million (USD 2,057 million). The improvement in cash was recorded afterfunding capital expenditure outflows of AED 2,363 million (USD 644 million) comprising of pre-deliverypayments, spare engines, rotables, buildings and other capital items and paying dividends to theshareholder of AED 300 million (USD 82 million) during the year. Emirates’ cash balance more thanadequately covers the benchmark of maintaining cash balances for at least six months debt obligationsand lease rentals. Emirates’ cash management policy ensures that sufficient liquidity is maintained to meetday-to-day needs and its long term capital investment programme.

During the current financial year, Emirates used operating leases to finance seven aircraft at attractiveterms. These included two B777-300ER, one each from International Lease Finance Corporation (ILFC) andGeneral Electric Capital Aviation Services (GECAS) respectively; two A340-300 from Boeing AircraftHolding Company and three A340-500 were financed on a sale and leaseback basis. Emirates also raisedcirca USD 186 million (AED 683 million) at an attractive all-in cost to finance one A340-500 aircraft and torefinance one B777-200. This year Emirates also raised USD 239 million to finance 22 (twenty two) spareengines, including 15 (fifteen) Trent spare engines and 7 (seven) GE90 spare engines (for the B777-300ERfleet).

Emirates continued to adopt a well diversified balanced portfolio approach to finance its fleet requirements,with 55% coming from commercial sources (more than half of which was from international banks), 11%from export credit (US Ex-Im) finance and 34% through operating lessors i.e. ILFC and GECAS.

Emirates’ cash profit from operations (or EBITDAR) for the year ended 31 March 2005 was robust at 29.1%of operating revenue or AED 5,128 million, up by AED 1,376 million (36.7%) from year ending 31 March2004. EBITDAR for the year equated to more than twenty one months of debt service and lease rentals,including principal and interest payments on aircraft financing and bond issues.

Emirates continued to follow a balanced portfolio approach by hedging around half of its interest rateexposure going forward, using a blend of natural hedge solutions and swaps. In line with this approach,Emirates used fixed rate financing on four of the eight aircraft delivered during the year. Emirates’borrowings and lease liabilities (net of cash) after including operating rentals, at 31 March 2005, comprised67% on a fixed interest rate basis with the balance 33% on floating interest rates. A 1% increase in interestrate would increase the interest charges and the operating lease charges (net of interest income) during thenext financial year by AED 22 million (2004: AED 52 million). At 31 March 2005, Emirates borrowings andlease liabilities carried a weighted average interest rate of circa 3.52% (2004: 3.65%).

On the currency front, taking advantage of the continuing weak dollar, Emirates secured financing in UKSterling and Euros for two A340-500s and four B777-300ERs (three to be delivered next year). Thisfinancing will provide a natural hedge against some of its Sterling and Euro inflows. At 31 March 2005,around 23% of the net annual UK Sterling receipts were hedged, while for Euros and Japanese Yen, thehedging coverage was 19% and 45% respectively.

Capital

expenditure

Financial

position

60

The Emi rates Group

Financialposition(continued)

Emirates’ shareholder’s funds at 31 March 2005 was AED 7,642 million (USD 2,082 million), up by 56.1%compared to AED 4,897 million (USD 1,334 million) at 31 March 2004. Emirates’ long term borrowings andlease liabilities was AED 7,635 million (USD 2,080 million) at 31 March 2005, a net increase of AED 669 million(USD 182 million) over 31 March 2004. At 31 March 2005, Emirates’ long term borrowings and leaseliabilities (net of cash) / shareholders’ funds ratio was 4.0% (2004: 10.7%). After including operating leases,the same ratio was 108% (2004: 152%).

DnataAt 31 March 2005, Dnata’s cash position (including held to maturity cash investments of AED 129 million)improved by 16.5% to AED 972 million (USD 265 million). The improvement in cash was recorded afterfunding capital expenditure outflows of AED 142 million, funding subsidiary acquisition of AED 58 millionand paying dividends to the shareholder of AED 29 million during the year.

The year marked the first ever financing by Dnata (through its fully owned subsidiary Kedma Holdings Pte Ltd.)of Singapore Dollars 140 million (USD 85 million) to acquire a 100% stake in Changi International AirportServices (CIAS), which is a provider of aircraft handling and catering services at Singapore airport.

Dnata’s shareholder’s funds at 31 March 2005 was AED 1,126 million (USD 307 million), up by 30%compared to AED 866 million (USD 236 million) at 31 March 2004. Dnata’s long term debt was AED 278 million(USD 76 million) at 31 March 2005 (2004: NIL).

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61

The Emi rates Group

Value added

In 2004-05, the total ‘value added’ of the Group increased by AED 1,573 million(27.7%) to AED 7,249 million (2003-04: AED 5,676 million). The increase camemainly from increased operating revenue (AED 4,997 million) while the cost ofpurchases of goods and services increased by AED 3,506 million.

Employees received AED 3,387 million (46.7% of the total value added) in theform of salaries and other related costs including a profit share whilstdistributions on account of taxation, interest, dividends and minority interestswere AED 805 million (11.1%).

The amount retained in the business for future growth was AED 3,057 million(42.2%).

Value added is a measure of wealth created. This statement shows the value addedby the Group over the past five years and its distribution by way of payments toemployees, governments and to providers of capital. It also indicates the portion ofwealth retained in the business.

2004-05 2003-04 2002-03 2001-02 2000-01AED'000 AED'000 AED'000 AED'000 AED'000

Group operating revenue 18,539,482 13,542,317 9,940,793 7,437,127 6,612,761Less: Purchase of goods and services 11,842,683 8,336,822 6,139,412 4,568,328 3,970,290

6,696,799 5,205,495 3,801,381 2,868,799 2,642,471

Add: Other operating income 320,113 285,959 188,835 220,458 224,019Interest income 191,270 97,925 105,143 98,822 91,956Share of profit / (loss) of

associated companies 40,952 86,643 107,831 58,142 (7,325)

Total value added by the Group 7,249,134 5,676,022 4,203,190 3,246,221 2,951,121

Distribution of value added:To employees – salaries and other

employee costs 3,386,725 2,831,320 2,251,121 1,724,489 1,537,339To overseas governments –

Corporation and other taxes 58,685 16,871 16,996 13,302 10,272To suppliers of capital –

Dividends 368,000 329,000 240,000 140,000 140,000Interest 283,670 217,065 218,217 256,602 263,149Minority interests 95,332 110,726 53,396 22,632 24,822

Retained for re-investment and future growth –

Depreciation and amortisation 824,745 752,750 614,984 626,198 584,186Retained profits 2,231,977 1,418,290 808,476 462,998 391,353

Total distribution of value added 7,249,134 5,676,022 4,203,190 3,246,221 2,951,121

62

Emi rates

Revenue

2004-05 2003-04AED million % AED million %

Passenger 12,991 73.7 9,462 73.6Cargo 3,291 18.7 2,294 17.8Excess baggage 137 0.8 107 0.8Courier 112 0.6 91 0.7Mail 50 0.3 33 0.3

Transport revenue 16,581 94.1 11,987 93.2

Sale of goods 779 4.4 698 5.4Destination and leisure (see below) 123 0.7 86 0.7Other 137 0.8 84 0.7

Total operating revenue 17,620 100.0 12,855 100.0

Destination and leisure revenue reflects the net income after elimination of inter companytransactions and direct operating costs. Total package sales achieved for 2004-05 wereAED 802.5 million up 37% on the previous year (2003-04: AED 585.4 million).

36.7% Europe & Americas

27.8% East Asia & Australasia

16.4% Middle East

9.7% West Asia & Indian Ocean

9.4% Africa

Segment revenue

63

Emi rates

Expenditure

2004-05 2003-04AED million % AED million %

Fuel and oil 3,279 21.4 1,633 14.4Employee (see (a) below) 2,701 17.6 2,254 19.8Sales and marketing 1,896 12.4 1,464 12.9Aircraft operating leases 1,878 12.2 1,352 11.9Handling 933 6.1 736 6.5Depreciation 675 4.4 622 5.5Overflying 673 4.4 506 4.4In-flight catering 655 4.3 480 4.2Aircraft maintenance 461 3.0 449 3.9Cost of goods sold 407 2.7 382 3.4Landing and parking 374 2.4 270 2.4Amortisation 32 0.2 41 0.4Corporate overheads 1,376 8.9 1,179 10.3

Total operating costs (see (b) below) 15,340 100.0 11,368 100.0

(a) Includes in-house engineering employees.(b) Excludes interest and financing costs.

21.4% Fuel & oil

17.6% Employee

12.4% Sales & marketing

12.2% Aircraft operating leases

8.9% Corporate overheads

6.1% Handling

4.6% Depreciation and amortisation

4.4% Overflying

4.3% In-flight catering

3.0% Aircraft maintenance

2.7% Cost of goods sold

2.4% Landing and parking

Expenditure

64

Emi rates

Yield, unit cost and breakeven load factor

Overall yield increased by 6.0% to 192 fils per tonne-kilometre.

Passenger yield increased 7.1% mainly on account of stronger currencies, an increase inpremium class traffic and the collection of additional fuel surcharges to cover higher fuelcost. Cargo yield increased by 7.2% on account of stronger currencies, collection ofcargo security and fuel surcharges designed to cover higher operating costs.

Unit cost increased by 4.8 fils (4.4%) to 111.5 fils per capacity tonne-kilometre. Theincrease is mainly due to fuel costs up by 8.7 fils partly offset by reduction in corporateoverheads by 1.3 fils, staff costs by 1.5 fils and depreciation charges by 1 fil.

The breakeven load factor has improved to 58.2% from 59.0% last year benefiting fromthe overall net yield increase.

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Yield and unit cost

65

Emi rates

Capacity, traffic and load factor

Traffic increased by 30.5% to 8,649 million tonne-kilometre, and the capacityincreased by 30.2% to 13,292 million tonne-kilometres. Aircraft departuresincreased by 22.6% to 72,057 while aircraft utilisation remained one of thehighest in the industry at 13.7 hours per day.

The increase in traffic came principally from:

� introduction of new passenger services to Vienna, Glasgow, Shanghai,New York, Christchurch and Seychelles

� increased frequencies to India, Jordan, Hongkong, Japan, United Kingdomand Russia

� increased capacity to existing destinations with bigger aircraft, mainlyFrankfurt, Munich, Peshawar, Kuwait, Cairo and Mauritius

� increase in freighter operations (57% higher compared with the previous year)with the introduction of new cargo services to Johannesburg, Lahore andNairobi and operation of charters to various destinations.

Passenger seat factor at 74.6% increased by 1.2 percentage points over lastyear. Passengers carried reached 12.5 million in 2004-05, representing anincrease of 20% over last year.

Cargo carried in 2004-05 improved by 27.1% to 838,400 tonnes(2003-04: 659,816 tonnes), recording strong growth across the entire network.

Overall load factor increased marginally to 65.1% (2003-04: 64.9%).

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Pax and cargo carried

66

Emi rates

Employee strength and productivity

In the year under review, the average workforce rose by 3,676 (22.6%) to 19,956. Theaverage number of employees in the airline grew by 3,054 (23.9%) to 15,858 as a resultof the significant growth in capacity.

A breakdown of the number of employees by category is shown below:

2004-05 2003-04

UAECabin crew 5,612 4,340Flight deck crew 1,060 862Engineering 1,112 917Other 5,203 4,359

12,987 10,478

Overseas stations 2,871 2,326

Total Emirates 15,858 12,804

Subsidiary companies 4,098 3,476

Average employee strength 19,956 16,280

Employee productivity for the airline, measured in terms of revenue per employee was up11.1% at AED 1,103,117 compared with AED 993,171 in 2003-04.

Value added, which is a measure of wealth created by the airline was AED 5,873 millionup 29.2% on last year (2003-04: AED 4,548 million). This is equivalent to AED 370,380per employee, up 4.3% over the previous year (2003-04: AED 355,197).

Capacity per airline employee improved for the fifteenth year with a 5.2% increasein ATKM to 838,202 (2003-04: 797,156). In addition, load carried per airline employeeincreased 5.3% to RTKM 545,392 (2003-04: 517,727).

67

Emi rates

Employee strength and productivity (continued)

2000-01 2001-02 2002-03 2003-04 2004-05

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Emi rates

Fleet information

68

Aircraft In operation On firm order On option

B777-200 9 - -B777-300 12 - -B777-300ER 2 * 4 9A310-300 1 - -A310-300F - 3 * -A330-200 29 - -A340-300 8 - -A340-500 8 2 -A340-600 - 10 8A380-800 - 43 -

Total 69 62 17

*At 31 March 2005, one B777-300ER was delivered and commenced service on2 April 2005. Further, one of the three A310-300 aircraft was delivered and is undergoingconversion to freighter aircraft.

Emirates also had six B747 freighters on wet lease for its cargo operations at 31 March 2005.

In addition to the above, Emirates has contracted for twenty four B777-300ER aircraft fordelivery between April 2005 and October 2007 from ILFC (11 units) and GECAS (13 units).Further contracts exist for two A380-800 aircraft for delivery in April and May 2007 andtwo A340-600 aircraft for delivery in April and May 2008 from ILFC.

Emirates operates one of the youngestfleet in the industry with an average ageof 55 months as compared with anindustry average of 156 months.

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Average fleet age:Emirates and industry

Dnata

Revenue

69

2004-05 2003-04AED million % AED million %

Airport operations 565 41.7 441 41.8

Information technology 264 19.5 246 23.3

Cargo 243 17.9 152 14.4

Reservations system 110 8.1 101 9.5

Agency commission 94 6.9 83 7.9

Sale of goods 45 3.3 - -

Other 34 2.6 32 3.1

Total operating revenue 1,355 100.0 1,055 100.0

41.7% Airport operations

19.5% Information technology

17.9% Cargo

8.1% Reservations system

6.9% Agency commission

3.3% Sale of goods

2.6% Other

Revenue

Dnata

Expenditure

70

2004-05 2003-04AED million % AED million %

Employee 686 59.7 577 62.7

Depreciation and amortisation 118 10.3 90 9.8

Office accommodation 45 3.9 44 4.8

Cost of goods sold 13 1.2 - -

Operating lease rentals 7 0.6 - -

Corporate overheads 280 24.3 209 22.7

Total operating costs 1,149 100 920 100

59.7% Employee

24.3% Corporate overheads

10.3% Depreciation and amortisation

3.9% Office accommodation

1.2% Cost of goods sold

0.6% Operating lease rentals

Expenditure

71

Dnata

Aircraft, passengers and cargo handled

Dubai International Airport maintained its impressive growth on traffic volumes:

� the number of passengers handled were 22.4 million, an increase of 17.0%or 3.3 million over the previous year

� the volume of cargo handled was 457,869 tonnes. This shows a robustgrowth of 12.8% as compared with last year’s volume of 405,906 tonnes

� Dnata handled 115 (2003-04: 110) scheduled international airlines operatingto Dubai International Airport

� the number of aircraft handled during the year increased by 16.3% to 93,004as compared with 79,932 during 2003-04.

2000-01 2001-02 2002-03 2003-04 2004-05

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72

Dnata

Aircraft, passengers and cargo handled (continued)

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73

Dnata

Employee strength and productivity

A breakdown of the number of employeesby category is shown below:

2004-05 2003-04

Airport operations 5,563 4,601Cargo handling 894 849Dnata agencies 580 550Other 1,159 1,186

Total Dnata 8,196 7,186

Subsidiary companies 1,411 139

Average employee strength 9,607 7,325

During the year under review, the average workforce increased by 2,282(31.2%) to 9,607. The average workforce in subsidiaries has increased by 1,272in 2004-05 to reach 1,411 (2003-04: 139) mainly on account of the acquisitionof CIAS in October 2004.

Revenue per employee for Dnata increased by 2.7% to AED 154,584 fromAED 150,495 in 2003-04.

Value added which is a measure of wealth created by Dnata during the year,was up by 18.3% to AED 987 million (2003-04: AED 834 million). This isequivalent to AED 120,433 per employee, an increase of 3.8% over theprevious year (2003-04: AED 116,071).

Aircraft handled per airport employee was 17 (2003-04: 17) while passengershandled per airport employee decreased by 3.2% to 4,025 (2003-04: 4,158).These decreases are mainly due to the build up of manpower at the airport to

handle the operations atgeographically dispersedterminals being built as apart of overall airportexpansion.

Cargo handled per cargohandling employee was512,158 kgs comparedwith 478,099 kgs in 2003-04,an increase of 7.1% over2003-04.

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The Emi rates Group

Glossary

74

1. ATKM (Available Tonne Kilometre) - Overall capacity measured in tonnes available for carriage ofpassengers and cargo load multiplied by the distance flown

2. RTKM (Revenue Tonne Kilometre) - Actual traffic load (passenger and cargo) carried measured in termsof tonnes multiplied by the distance flown

3. ASKM (Available Seat Kilometre) - Passenger seat capacity measured in seats available multiplied by thedistance flown

4. RPKM (Revenue Passenger Kilometre) - Number of passengers carried multiplied by the distance flown

5. EBITDAR - Operating profit before depreciation, amortisation and operating lease rentals

1. Passenger Seat factor - RPKM divided by ASKM

2. Overall Load Factor - RTKM divided by ATKM

3. Yield (Fils per RTKM) - Transport revenue earned per RTKM

4. Unit cost (Fils per ATKM) - Operating costs incurred per ATKM

5. Breakeven load factor - The load factor at which transport revenue will equal operating costs

6. Operating margin - Operating profit expressed as a percentage of sum of operating revenue and otheroperating income

7. Net margin - Profit for the year expressed as a percentage of sum of operating revenue and otheroperating income

8. Return on shareholders’ funds - Profit for the year expressed as a percentage of average shareholders’funds

9. Operating cash margin - Cash generated from operating activities expressed as a percentage of sum ofoperating revenue and other operating income

Terms

Ratios

75

Emi rates

Independent auditors’ report to the Government of Dubai

We have audited the accompanying consolidated balance sheet of Emirates ("the

company") and its subsidiaries (together referred to as "Emirates") as at 31 March 2005

and the related consolidated statements of income and cash flows for the year then

ended. These financial statements are the responsibility of the company’s management.

Our responsibility is to express an opinion on these financial statements based on our

audit.

We conducted our audit in accordance with International Standards on Auditing. Those

Standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in

the financial statements. An audit also includes assessing the accounting principles used

and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audit provides a reasonable basis

for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of Emirates as at 31 March 2005 and the results of its

operations and its cash flows for the year then ended in accordance with International

Financial Reporting Standards.

PricewaterhouseCoopers

Chartered Accountants

Dubai

16 April 2005

76

Emi rates

Consolidated income statement for the year ended 31 March 2005

Notes 2005 2004AED'000 AED'000

Operating revenue 2 17,619,769 12,854,515

Other operating income 3 284,404 261,918

Operating costs 4 (15,339,681) (11,367,677)

Operating profit 2,564,492 1,748,756

Net financing costs 5 (106,565) (127,878)

Associated companies - share of results 10 33,759 80,230

Profit before taxation 2,491,686 1,701,108

Income tax expense 6 (56,783) (16,871)

Profit after taxation and before minority interest 2,434,903 1,684,237

Minority interest 7 (95,332) (110,726)

Profit for the year 2,339,571 1,573,511

The accounting policies on pages 80 to 85 and the notes on

pages 86 to 101 form an integral part of the consolidated financial

statements.

77

Emi rates

Consolidated balance sheet at 31 March 2005

Notes 2005 2004AED'000 AED'000

ASSETS

Non-current assetsProperty, plant and equipment 8 9,761,869 7,615,681Intangible assets 9 419,212 327,054Investment in associated companies 10 180,178 172,287Available-for-sale investments 11 2,872 2,872Held-to-maturity investments 11 220,380 36,730Advance lease rentals 12 239,186 184,924Derivative financial instruments 27 734,502 98,467

11,558,199 8,438,015

Current assetsInventories 13 600,441 489,483Trade and other receivables 14 3,074,533 2,524,020Held-for-trading investments 11 96,100 112,975Cash and cash equivalents 25 7,328,459 6,454,929Derivative financial instruments 27 563,735 318,312

11,663,268 9,899,719

Total assets 23,221,467 18,337,734

EQUITY AND LIABILITIES

Capital and reservesCapital 15 801,214 772,214Reserves 6,841,180 4,125,132

7,642,394 4,897,346

Minority interest 7 149,703 115,234

Non-current liabilitiesBorrowings and lease liabilities 16 7,634,790 6,965,980Provisions 19 289,758 238,719Deferred credits 20 581,658 572,585Derivative financial instruments 27 392,948 324,022

8,899,154 8,101,306Current liabilitiesTrade and other payables 21 5,890,995 4,557,096Taxation 43,980 12,367Borrowings and lease liabilities 22 507,239 653,866Derivative financial instruments 27 88,002 519

6,530,216 5,223,848

Total liabilities 15,429,370 13,325,154

Total equity and liabilities 23,221,467 18,337,734

The consolidated financial statements were approved on the 16th day of April 2005 and signed by:

Sheikh Ahmed bin Saeed Al-Maktoum Maurice FlanaganChairman Vice Chairman and Group President

The accounting policies on pages 80 to 85 and the notes on pages86 to 101 form an integral part of the consolidated financial statements.

78

Emi rates

Consolidated statement of changes in equity for the year ended 31 March 2005

Translation Fair value RetainedCapital reserve reserves earnings Total

AED'000 AED'000 AED'000 AED'000 AED'000

1 April 2003 732,214 (13,179) 261,272 2,728,267 3,708,574

Additions during the year 40,000 - - - 40,000

Currency translation differences (Note 10) - 173 - - 173

Gains due to changes in fair value - - 182,508 - 182,508

Transferred to income statement - - (307,420) - (307,420)

Profit for the year - - - 1,573,511 1,573,511

Dividend - - - (300,000) (300,000)

1 April 2004 772,214 (13,006) 136,360 4,001,778 4,897,346

Additions during the year 29,000 - - - 29,000

Currency translation differences (Note 10) - (3,984) - - (3,984)

Gains due to changes in fair value - - 1,189,561 - 1,189,561

Transferred to income statement - - (441,100) - (441,100)

Profit for the year - - - 2,339,571 2,339,571

Dividend - - - (368,000) (368,000)

31 March 2005 801,214 (16,990) 884,821 5,973,349 7,642,394

The accounting policies on pages 80 to 85

and the notes on pages 86 to 101 form an

integral part of the consolidated financial

statements.

79

Emi rates

Consolidated statement of cash flows for the year ended 31 March 2005

2005 2004AED'000 AED'000

Operating activitiesProfit for the year before taxation and after minority interest 2,396,354 1,590,382Adjustments for:Depreciation and amortisation (Note 4) 706,917 662,765Net financing costs (Note 5) 106,565 127,878Net amortisation of bond issue costs 2,014 1,149Recognition of proceeds from liquidation of derivative financial instruments (23,919) (23,298)Loss / (profit) on sale of property, plant and equipment and intangibles 5,292 (7,832)Associated companies - share of results (Note 10) (33,759) (80,230)Fair value loss / (gain) on held-for-trading investments 1,753 (1,354)Provision for impairment of trade receivables 11,566 8,295Provision for employee benefits 160,007 115,476Deferred credits recognised (Note 20) (78,334) (72,555)

Operating cash flows before working capital changes 3,254,456 2,320,676

Employee benefit payments (129,054) (97,955)Net advance lease rentals (Note 12) (54,262) (184,924)

Changes in working capital:Inventories (110,958) (83,100)Trade and other receivables (561,802) (752,047)Current liabilities and deferred accounts 1,424,773 1,368,195Tax paid (25,170) (16,034)

Net cash provided from operating activities 3,797,983 2,554,811

Investing activitiesProceeds from sale of property, plant and equipment and intangibles 2,592 42,052Additions to intangibles (73,617) (69,854)Capital expenditure (Note 26) (2,363,172) (1,045,213)Additional investment in a subsidiary (Note 10) (66,000) (32,000)Acquisition (Note 28) (6,013) -Held-to-maturity investments made during the year (183,650) -Sale / (purchase) of held-for-trading investments 15,122 (100,000)Proceeds from liquidation of derivative financial instruments 47,864 22,088Interest income 178,389 82,328Dividend received from associated companies (Note 10) 21,884 14,203

Net cash used in investing activities (2,426,601) (1,086,396)

Financing activitiesNet proceeds from issue of bonds (Note 16) - 1,828,402Net proceeds from term loans (Note 17) 669,830 2,495Aircraft financing costs (157,355) (157,624)Other finance charges (84,796) (34,631)Net lease liabilities (604,864) (366,611)Dnata account - (28,845)Capital introduced 29,000 40,000Dividend paid (300,000) (300,000)Dividend paid to minority shareholders (Note 7) (38,670) (89,832)

Net cash (used in) / provided from financing activities (486,855) 893,354

Net increase in cash and cash equivalents 884,527 2,361,769

Cash and cash equivalents at beginning of year 6,443,932 4,082,163

Cash and cash equivalents at end of year (Note 25) 7,328,459 6,443,932

The accounting policies on pages 80 to 85 and the notes on pages 86 to 101form an integral part of the consolidated financial statements.

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Principal accounting policies

A summary of the principal accountingpolicies, which have been appliedconsistently, is set out below.

The consolidated financial statements have been prepared in accordance withand comply with International Financial Reporting Standards (IFRS). Theconsolidated financial statements are prepared under the historical costconvention except as modified by the revaluation of available-for-saleinvestments, held-for-trading investments and derivative financial instruments.

Subsidiaries are those entities in which Emirates has an interest of more thanone half of the voting rights or otherwise has the power to govern the entity’soperating and financial policies. Subsidiaries are consolidated from the dateon which control is transferred to Emirates and are no longer consolidatedfrom the date that control ceases. All material inter-company transactions,balances and unrealised surpluses and deficits arising on transactionsbetween Emirates and its subsidiaries are eliminated.

The purchase method of accounting is used to account for acquisition ofsubsidiaries. The cost of an acquisition is measured as the fair value of assetsgiven and liabilities assumed at the date of exchange, plus costs directlyattributable to the acquisition. Identifiable assets including intangiblesacquired and liabilities and contingent liabilities assumed in a businesscombination are measured at their fair values at the acquisition date.

Associated companies are those entities in which Emirates has between 20%and 50% of the voting rights, or over which it has significant influence, butwhich it does not control. Investment in associated companies are accountedfor in accordance with the equity method and includes goodwill (net ofaccumulated impairment loss) on acquisition.

Joint ventures are contractual arrangements which establish joint control. Asa jointly controlled operation, each venturer individually recognises the assetsit controls, liabilities and expenses it incurs and its share of income from theservices rendered.

All material unrealised surpluses and deficits arising on transactions betweenEmirates and its associates and joint ventures are eliminated to the extent ofEmirates’ interest.

Passenger and cargo sales are recognised as revenue when the transportationis provided. Tickets sold but unused are held in the balance sheet undercurrent liabilities as passenger and cargo sales in advance.

Revenue from sale of goods is recognised when risks and rewards ofownership are transferred to the customer and are stated net of discounts andreturns. Other operating revenue is recognised net of discounts when servicesare rendered.

Interest income is recognised on a time proportion basis using the effectiveinterest method.

Basis of preparation

Basis of consolidation

Revenue

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Principal accounting policies (continued)

Foreign currency transactions are translated into UAE Dirhams at exchange ratesapproximating those ruling on the transaction dates. Monetary assets and liabilitiesdenominated in foreign currencies are translated into UAE Dirhams at the exchange ratesruling on the balance sheet date. The resultant foreign exchange gains or losses, otherthan those on qualifying cash flow hedges deferred in equity, are recognised in theincome statement.

Share of results in associated companies are translated into UAE Dirhams at averageexchange rates for the year. Translation differences relating to investments in associatedcompanies and subsidiaries are classified as translation reserve in equity until thedisposal of the investment when the translation differences are recognised in the incomestatement as part of the gain or loss on sale.

Taxation is provided for as and when the liability arises except where management is ofthe firm opinion that exemption from such taxation will ultimately be granted by therelevant authorities in the countries concerned.

Property, plant and equipment is stated at cost less accumulated depreciation. Costconsists of purchase cost, together with any incidental expenses of acquisition.

Land is not depreciated. Depreciation is calculated on other items of property, plant andequipment so as to write off its cost, less estimated residual values, on a straight linebasis over the useful lives of the assets concerned. The estimated useful lives andresidual values are:

Aircraft 15 years (residual value 10%)Aircraft engines and rotable spares 5 - 15 years (residual value 0 - 10%)Buildings 5 - 20 yearsOther property, plant and equipment 3 - 15 years or over the lease term

When the carrying amount of an asset is greater than its estimated recoverable amount,it is written down immediately to its recoverable amount.

Repairs and maintenance are charged to the income statement during the period inwhich they are incurred. Major modifications and improvements to property, plant andequipment are capitalised and depreciated over the lower of the remaining useful life orthe lease term of the related asset.

Emirates receives credits from manufacturers in connection with the acquisition of certainaircraft and engines. Depending on the terms of credits, these credits are either recordedas a reduction to the cost of the related aircraft and engines or reduced from ongoingoperating expenses. Where the aircraft are held under operating leases, the credits aredeferred and reduced from the operating lease rentals on a straight line basis over theperiod of the related lease as deferred credits.

Foreign currency translation

Taxation

Property, plant and equipment

Manufacturers' credits

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Principal accounting policies (continued)

Capital projects are stated at cost together with financing costs incurred fromthe date of commencement of the project to the date on which it iscommissioned. When commissioned, capital projects are transferred to theappropriate category under property, plant and equipment and depreciated inaccordance with Emirates’ policies.

Where property, plant and equipment have been financed by lease agreementsunder which substantially all of the risks and rewards of ownership aretransferred to Emirates, they are treated as if they had been purchasedoutright and classified as finance leases. Finance leases are capitalised at theinception of the lease at the lower of the present value of the minimum leasepayments or the fair value of the leased asset. The corresponding leaseobligations are included under liabilities. Lease payments are treated asconsisting of capital and interest elements. Interest is computed on a timeproportion basis at rates specified in the lease agreement. Interest expensetogether with depreciation on the asset are charged to the income statement.

Leases where a significant portion of risks and rewards of ownership areretained by the lessor are classified as operating leases. Lease rental chargesincluding advance rentals in respect of operating leases are charged to theincome statement on a straight line basis over the period of the lease.

Profits arising on sale and leaseback transactions resulting in operating leasesare recognised in the income statement to the extent that the sale proceedsdo not exceed the fair value of the assets concerned. Any excess of saleproceeds over the fair value is deferred and amortised over the lease term. Inthe case of profit on sale and leaseback transactions resulting in financeleases, the excess of sale proceeds over the carrying amount is deferred andamortised over the lease term.

Intangible assets are capitalised at cost only when future economic benefitsare probable. Cost includes purchase price together with any directlyattributable expenditure.

When the carrying amount of an intangible asset is greater than its estimatedrecoverable amount, it is written down immediately to its recoverable amount.

Intangible assets are amortised on a straight line basis over their estimateduseful lives which are:

Service rights 15 yearsComputer software 5 years

Capital projects

Finance and operating leases

Intangible assets

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Principal accounting policies (continued)

Goodwill represents the excess of the cost of an acquisition or subsequent exchangetransaction over the fair value of the share of the net assets acquired by Emirates in itssubsidiaries at the date of acquisition or subsequent exchange transaction. Goodwill ispresented with intangible assets.

Goodwill is tested annually for impairment and carried at cost less accumulatedimpairment losses. For the purpose of impairment testing, goodwill is allocated to cashgenerating units. An impairment loss is recognised when the carrying value of the cashgenerating unit exceeds its recoverable amount.

Investments intended to be held for an indefinite period of time are classified asavailable-for-sale. Such investments are initially recognised in the balance sheet on thetrade date at cost including transaction costs.

Quoted investments are subsequently measured at their fair value based on quoted bidprices.

Unquoted investments in this category are stated at cost less impairment if fair valuescannot be reliably measured.

At each balance sheet date a review is made for an indication of impairment and wherenecessary the carrying amount is written down through the income statement to thepresent value of expected future cash flows discounted at current market rates.

Unrealised gains and losses arising from changes in the fair value are recognised in thefair value reserves in equity until the investment is sold, at which time the cumulative gainor loss previously recognised in equity is included in the income statement.

Investments with fixed maturity that management has the intent and ability to hold tomaturity are recognised in the balance sheet on the trade date as held-to-maturityinvestments. Such investments are stated at amortised cost using the effective interestmethod.

At each balance sheet date a review is made for an indication of impairment and wherenecessary the carrying amount is written down through the income statement to thepresent value of expected future cash flows discounted at current market rates.

Investments that are intended to be held for the short term are classified as held-for-trading and included in current assets. Such investments are initially recognised in thebalance sheet on the trade date at cost including transaction costs and subsequentlymeasured at their fair value based on quoted bid prices. Realised and unrealised gainsand losses arising from changes in the fair value of such investments are included in theincome statement.

Goodwill

Available-for-sale investments

Held-to-maturityinvestments

Held-for-trading investments

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Principal accounting policies (continued)

Derivative financial instruments are initially recognised in the balance sheet atcost including transaction costs and subsequently remeasured at their fairvalues. Derivatives are designated either as a hedge of the fair value of arecognised asset or liability (fair value hedge) or a hedge of a forecastedtransaction or of a firm commitment (cash flow hedge). Fair values areobtained from quoted market prices, discounted cash flow models and optionpricing models as appropriate. All derivatives are carried as assets when fairvalue is positive and as liabilities when fair value is negative.

Emirates’ criteria to account for a derivative instrument as a hedge include:

� formal documentation of the hedging instruments, hedged items, hedgingobjective, strategy and basis of measuring effectiveness all of which areprepared prior to applying hedge accounting; and

� documentation showing that the hedge effectiveness is assessed on anongoing basis and is determined to have been highly effective in offsettingthe risk of the hedged item throughout the reporting period.

Changes in the fair value of derivatives that are designated and qualify as fairvalue hedges and that are highly effective, are recorded in the incomestatement, along with any changes in the fair value of the hedged asset orliability.

Changes in the fair value of derivatives that are designated and qualify as cashflow hedges and that prove to be highly effective in relation to the hedged risk,are recognised in the fair value reserves in equity. When the forecastedtransaction or firm commitment results in the recognition of an asset or of aliability, the gains and losses previously deferred in equity are transferred fromequity and included in the initial measurement of the cost of the asset orliability. In all other cases, amounts deferred in equity are transferred to theincome statement in the period during which the hedged firm commitment orforecasted transaction affects the income statement.

When a hedging instrument expires or is sold, or when a hedge no longermeets the criteria for hedge accounting under IAS 39, any cumulative gain orloss existing in equity at that time is retained in equity and is ultimatelyrecognised in the income statement when the committed or forecastedtransaction occurs. If a committed or forecasted transaction is no longerexpected to occur, the cumulative gain or loss that was reported in equity isimmediately transferred to the income statement.

Inventories are stated at the lower of cost or net realisable value. Cost isdetermined on the weighted average cost basis with the exception ofconsumer goods inventory which is determined on a first-in-first out basis.

Trade receivables are carried at original invoice amount less provision madefor impairment of these receivables. Where there is objective evidence ofamounts that are not collectible, a provision is made for the differencebetween the carrying amount and the recoverable amount.

Derivative financial instruments

Inventories

Trade receivables

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Principal accounting policies (continued)

Borrowings are recognised initially at the proceeds received, net of transaction costsincurred. After initial recognition, borrowings are subsequently stated at amortised costusing the effective interest method.

UAE national employees participate in the UAE government’s pension fund to which theemployee and Emirates contribute a specified percentage of salary. Contributions to thepension fund, are charged to the income statement in the period in which they fall due.

Senior employees who are based in the UAE participate in a defined contributionprovident fund to which the employee and Emirates contribute a specified percentage ofsalary. Contributions to the provident fund are charged to the income statement in theperiod in which they fall due.

End of service benefits for other employees based in the UAE are provided for as per UAElabour law and is based on periods of cumulative service and employees’ current basicsalary.

End of service benefits for employees based outside the UAE are provided for inaccordance with the relevant local regulations.

Emirates maintains a frequent flyer programme that provides a variety of awards toprogramme members based on a mileage credit for flights on Emirates and other airlinesthat participate in the programme. Members can also accrue miles by utilising theservices of non-airline programme participants.

Miles accrued through utilising the services of programme partners is paid for by theparticipating partners and the resulting revenue is recorded as other operating income.

The incremental direct cost of providing free travel as adjusted for estimated redemptionrates, is provided for as programme members accrue miles.

For the purpose of the cash flow statement, cash and cash equivalents comprise all cashand liquid funds with an original maturity of less than three months net of bank overdrafts.

Borrowings

Employee benefits

Frequent flyer programme

Cash and cash equivalents

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Notes to the consolidated financial statements for the year ended 31 March 2005

1. Establishment and operations Emirates comprises Emirates, its subsidiaries and associated companies. Emirates

was incorporated, with limited liability, by an Emiri Decree issued by H. H. SheikhMaktoum bin Rashid Al-Maktoum on 26 June 1985 as the national airline for theemirate of Dubai, UAE. Emirates is wholly owned by the Government of Dubai andcommenced commercial operations on 25 October 1985.

The main activities of Emirates comprise:

� commercial air transportation which includes passenger, cargo and postal carriageservices

� wholesale and retail of consumer goods

� in-flight and institutional catering

� hotel operations

2. Operating revenue

2005 2004AED'000 AED'000

Services

Passenger 12,990,911 9,461,782

Cargo 3,290,886 2,293,543

Excess baggage 137,015 106,586

Destination and leisure 123,148 86,221

Courier 111,593 91,016

Hotel operations 62,304 31,076

Training 58,240 37,367

Mail 50,126 32,741

Licensed engineering income 16,144 16,204

16,840,367 12,156,536

Sale of goods 779,402 697,979

17,619,769 12,854,515

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2. Operating revenue (continued)

Segment informationPrimary reporting format - geographical segments

Europe & East Asia & West Asia &Middle East Americas Australasia Indian Ocean Africa Total

AED'000 AED'000 AED'000 AED'000 AED'000 AED'000

2005

Segment revenue 2,938,766 6,571,675 4,974,109 1,738,190 1,681,433 17,904,173

Segment results 1,465,537 1,916,717 1,215,533 534,218 569,075 5,701,080

Unallocated costs (3,136,588)

Operating profit 2,564,492Associated companies-share of results 33,759 - - - - 33,759

Net financing costs (106,565) - - - - (106,565)

Income tax expense (11,803) - (42,256) - (2,724) (56,783)

Minority interest (95,332) - - - - (95,332)

Profit for the year 2,339,571

2004

Segment revenue 2,610,596 4,198,456 3,713,923 1,450,254 1,143,204 13,116,433

Segment results 1,274,687 1,340,518 1,005,711 532,075 321,174 4,474,165

Unallocated costs (2,725,409)

Operating profit 1,748,756Associated companies-share of results 80,230 - - - - 80,230

Net financing costs (127,878) - - - - (127,878)

Income tax expense (7,956) - (8,540) - (375) (16,871)

Minority interest (110,726) - - - - (110,726)

Profit for the year 1,573,511

Transport revenue is allocated to the segments based on turnover by destination. Revenue frominbound and outbound airline operations between UAE and the overseas point are attributed tothe geographical area in which the respective overseas points are located. The Middle Eastsegment also includes other operating income and revenue streams since it is the principalsegment in which services are rendered. Costs not directly attributable to geographicalsegments are shown as unallocated.

The major revenue earning asset is the aircraft fleet which is registered in the UAE. Since theaircraft fleet is deployed flexibly across the Emirates’ route network, there is no suitable basis ofallocating such assets and the related depreciation and liabilities to geographical segments.

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2. Operating revenue (continued)

Segment informationSecondary reporting format - business segments

Airline Consumer related goods Other Total

AED'000 AED'000 AED'000 AED'000

2005Segment revenue 17,298,332 519,719 86,122 17,904,173

Total assets 22,634,554 358,499 228,414 23,221,467

Capital expenditure and intangible assets 2,898,442 8,267 46,084 2,952,793

2004Segment revenue 12,606,088 461,034 49,311 13,116,433

Total assets 17,823,159 286,788 227,787 18,337,734

Capital expenditure and intangible assets 1,393,478 3,367 27,726 1,424,571

3. Other operating incomeOther operating income includes an amount of AED 113.2 million(2004: AED 66.8 million) being collections from ancillary services providedin relation to transportation of passengers and cargo, unrealised loss onheld-for-trading investments of AED 4.4 million (2004: gain of AED 1.9 million)and a net exchange gain of AED Nil (2004: AED 73.4 million).

4. Operating costs

2005 2004AED'000 AED'000

Fuel and oil 3,279,107 1,632,574

Employee (see (a) below & (d) over) 2,700,992 2,254,113

Sales and marketing 1,896,421 1,464,404

Aircraft operating leases (see (b) over) 1,878,249 1,351,983

Handling (see (c) over) 932,680 735,483

Depreciation (Note 8) 674,960 621,853

Overflying (see (c) over) 672,641 505,733

In-flight catering 654,692 480,144

Aircraft maintenance 461,275 448,847

Cost of goods sold 406,706 382,391

Landing and parking (see (c) over) 374,116 269,967

Amortisation (Note 9) 31,957 40,912

Corporate overheads (see (e) over) 1,375,885 1,179,273

15,339,681 11,367,677

Employee costs include AED 160.0 million (2004: AED 115.5 million) inrespect of employee benefits and AED 90.0 million (2004: AED 177.7 million)in respect of the employee profit share scheme.

(a)

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5. Net financing costs

2005 2004AED'000 AED'000

Aircraft financing costs (190,628) (182,263)

Interest charges (91,091) (35,283)

Interest income 175,154 89,668

(106,565) (127,878)

Interest charges include interest on bonds (Note 16) of AED 87.1 million(2004: AED 31.7 million). The total interest income before impact ofderivative financial instruments was AED 147.5 million (2004: AED 66.4 million).

6. Income taxTaxation relates only to certain overseas stations where Emirates is subjectto income tax and where tax exemptions are not likely to be obtained.Hence providing information on effective tax rates is not meaningful.

7. Minority interest

2005 2004AED'000 AED'000

Balance brought forward 115,234 109,461

Investment during the year - 2,215

Acquired during the year (Note 10) (22,193) (17,336)

Share of results for the year 95,332 110,726

Dividends paid (38,670) (89,832)

Balance carried forward 149,703 115,234

4. Operating costs (continued) Aircraft operating lease charges include AED 1,361.8 million(2004: AED 1,024.1 million) in respect of fifty aircraft (2004: thirty eight)and AED 516.4 million (2004: AED 327.9 million) in respect of wet leaseof freighter aircraft.

A detailed review of direct operating cost accruals is performed eachyear. This review necessitated an adjustment to the accruals for landing,handling and overflying costs resulting in a release of excess accrualsmade in prior years amounting to AED 26.4 million (2004: AED 3.7 million).

Average employee strength during the year was 19,956 (2004: 16,280).

Corporate overheads includes a net exchange loss of AED 11.0 million(2004: AED Nil).

(b)

(c)

(d)

(e)

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8. Property, plant and equipment

Aircraft Otherengines and property,

rotable Land and plant and CapitalAircraft spares buildings equipment projects TotalAED'000 AED'000 AED'000 AED'000 AED'000 AED'000

Cost

1 April 2004 5,880,291 1,434,634 926,068 1,120,874 1,095,485 10,457,352

Additions - 106,030 83,368 65,647 2,573,633 2,828,678

Acquisitions (Note 28) - - - 354 - 354

Transfers from capital projects 475,745 286,605 54,876 264,287 (1,081,513) -

Disposals (11,870) (12,103) (208) (13,175) - (37,356)

31 March 2005 6,344,166 1,815,166 1,064,104 1,437,987 2,587,605 13,249,028

Depreciation

1 April 2004 1,590,333 401,923 327,026 522,389 - 2,841,671

Charge for the year 380,587 95,025 55,964 143,384 - 674,960

Disposals (11,870) (4,419) (60) (13,123) - (29,472)

31 March 2005 1,959,050 492,529 382,930 652,650 - 3,487,159

Net book value

31 March 2005 4,385,116 1,322,637 681,174 785,337 2,587,605 9,761,869

31 March 2004 4,289,958 1,032,711 599,042 598,485 1,095,485 7,615,681

The net book value of aircraft and aircraft engines includes an amount ofAED 4,217.1 million (2004: AED 4,195.7 million) in respect of assets held under financeleases (Note 18).

The net book value of land and buildings, aircraft and aircraft engines includes anamount of AED 722.4 million (2004: AED 75.1 million) in respect of assets provided assecurity against term loans (Note 17).

No depreciation is charged on land carried at AED 59.7 million (2004: AED Nil), thetitle for which will be transferred to Emirates on final payment.

Capital projects Capital projects include pre-delivery payments of AED 1,376.5 mil l ion(2004: AED 779.1 million) in respect of aircraft (Note 23) due for delivery between2005 and 2011.

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9. Intangible assetsComputer

Goodwill Service rights software TotalAED'000 AED'000 AED'000 AED'000

Cost

1 April 2004 214,842 47,680 122,921 385,443

Additions 50,498 35,107 38,510 124,115

31 March 2005 265,340 82,787 161,431 509,558

Amortisation and impairment

1 April 2004 - - 58,389 58,389

Amortisation for the year - 4,185 21,034 25,219

Impairment charge (Note 28) 6,738 - - 6,738

31 March 2005 6,738 4,185 79,423 90,346

Net book value

31 March 2005 258,602 78,602 82,008 419,212

31 March 2004 214,842 47,680 64,532 327,054

Computer software includes an amount of AED 23.2 million (2004: AED 23.6 million)in respect of projects under implementation.

In accordance with the transitional provisions of IFRS 3, BusinessCombinations, the opening balance of goodwill is net of accumulatedamortisation of AED 58.2 million as at 31 March 2004.

For the purpose of testing goodwill for impairment, the entire goodwill isallocated to the consumer goods cash generating unit. The recoverableamount for the cash generating unit has been determined on the basis offair value less cost to sell. The calculations arrive at a business enterprisevalue using the discounted cash flow methodology.

The key assumptions and basis to arrive at the fair value include a riskadjusted discount rate, historical gross margins and growth rates based onmanagement’s expectations for market development.

10. Investment in subsidiaries, associatedcompanies and joint ventures

Subsidiaries

Country of Percentage incorporation

of equity and principalowned Principal activities operations

Maritime & Mercantile 68.7 Wholesale and retail UAEInternational L.L.C. consumer goods

Emirates Hotel L.L.C. 100.0 Hotel UAE

Emirates Flight Catering Company L.L.C. 54.7 Catering services to airlines UAE

During the year Emirates invested a further 17.4% in Maritime & MercantileInternational L.L.C..

There were no other changes in ownership during the year.

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10. Investment in subsidiaries, associated companies and joint ventures(continued)

Associated companies

Country of Percentage incorporation

of equity and principalowned Principal activities operations

SriLankan Airlines Limited 43.6 Air transportation, aircraft Sri Lankahandling and catering

Oman United Agencies L.L.C. 34.4 Wholesale and retail Sultanate ofconsumer goods Oman

The increase of 8.9% in the effective ownership in Oman UnitedAgencies L.L.C. is a result of the additional investment in Maritime &Mercantile International L.L.C..

There were no changes in ownership during the year.

Joint ventureThe joint venture with CAE Inc. provides flight simulator training in theUAE. The joint venture has been set up as a jointly controlledoperation.

Movement of investment in associated companies

2005 2004AED'000 AED'000

Balance brought forward 172,287 106,087

Share of results 33,759 80,230

Dividends received (21,884) (14,203)

Translation difference (3,984) 173

Balance carried forward 180,178 172,287

Investments in associated companies includes goodwill ofAED 31.3 million (2004: AED 31.3 million). In accordance with thetransitional provisions of IFRS 3, Business Combinations, goodwillas at 1 April 2004 is stated net of accumulated amortisation ofAED 3.8 million.

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(a) Available-for-sale investments represent unquoted depository certificates withoutfixed maturity in SITA Inc.. The investment is measured at cost as the fair valuecannot be reliably measured.

(b) Held-to-maturity investments:

Interest rate Maturity 2005 2004AED'000 AED'000

USD floating rate notes LIBOR + 35bps July 2007 36,730 36,730USD floating rate notes LIBOR + 50bps June 2006 128,555 -USD floating rate deposit LIBOR + 40bps May 2006 55,095 -

220,380 36,730

The effective interest rate was 2.37% (2004: 1.53%) per annum.

(c) Held-for-trading investments represent quoted bonds, the effective interest rate on which was 3.11% (2004: 1.63%) per annum.

12. Advance lease rentals

2005 2004AED'000 AED'000

Balance brought forward 184,924 -

Paid during the year 72,477 192,587

Charge for the year (18,215) (7,663)

Balance carried forward 239,186 184,924

Advance lease rentals are not refundable in the event of the related lease beingterminated prior to its expiry.

13. Inventories

2005 2004AED'000 AED'000

Engineering 391,168 320,358In-flight consumables 101,772 82,778Consumer goods 72,452 56,429Other 35,049 29,918

600,441 489,483

14. Trade and other receivables

Trade receivables

Airlines 88,976 80,604Agents 1,313,539 916,602Retail and consumer goods customers 254,183 198,436

1,656,698 1,195,642Other receivables

Prepayments and deposits 499,403 553,340Operating lease deposits 685,601 614,567Other 232,831 160,471

1,417,835 1,328,378

3,074,533 2,524,020

There is no significant concentration of credit risk.

The effective interest rate on operating lease deposits was 3.49% (2004: 3.94%)per annum.

11. Other investments

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15. Capital Capital represents the permanent capital provided by the Governmentof Dubai.

16. Borrowings and lease liabilities- non-current

2005 2004AED'000 AED'000

Lease liabilities (Note 18) 3,575,349 3,529,572Bonds (see (a) below) 3,327,878 3,325,864Term loans (Note 17) 731,563 110,544

7,634,790 6,965,980

(a) BondsInterest rate Maturity 2005 2004

AED'000 AED'000

AED Floating rate notes EBOR + 70bps July 2006 1,500,000 1,500,000USD Floating rate notes LIBOR + 80bps March 2011 1,836,500 1,836,500

3,336,500 3,336,500

Less: Unamortised transaction costs (8,622) (10,636)

3,327,878 3,325,864

EBOR is the UAE inter bank offered rate.

Contractual repricing dates are set for six months in January / July and March /September each year for bonds maturing in July 2006 and March 2011respectively.

Bonds may be redeemed earlier at principal amounts plus accrued interest onthe interest payment date in March 2009 for bonds maturing in March 2011 byEmirates or the holders of more than 50% of the bonds then outstanding.

17. Term loans

2005 2004AED'000 AED'000

Balance brought forward 114,544 112,049

Acquisitions (Note 28) 694 -Additions during the year 690,524 6,495Repayments during the year (20,694) (4,000)

Balance carried forward 785,068 114,544

Loans are repayable as follows:

Within one year (Note 22) 53,505 4,000

2-5 years 527,082 58,702After 5 years 204,481 51,842

Total over one year (Note 16) 731,563 110,544

Term loans are secured on buildings, aircraft and aircraft engines. The corporateguarantee of AED 50.0 million provided in the previous year for the term loanon buildings has been released.

Emi rates

95

18. Lease liabilities

Finance leases

2005 2004AED'000 AED'000

Gross lease liabilities:

Within one year 624,731 904,3062-5 years 3,153,447 3,109,097After 5 years 1,486,361 1,505,342

5,264,539 5,518,745

Future interest (1,011,502) (1,034,534)Term deposits (223,954) (315,770)

Net lease liabilities 4,029,083 4,168,441

Net lease liabilities are repayable as follows:

Within one year (Note 22) 453,734 638,869

2-5 years 2,307,403 2,233,488After 5 years 1,267,946 1,296,084

Total over one year (Note 16) 3,575,349 3,529,572

The lease liabilities are secured on the related aircraft and aircraft engines.In the event of these finance leases being terminated prior to their expiry,penalties are payable. Had these leases been cancelled at 31 March 2005,the penalties would have been AED 235.6 million (2004: AED 236.4 million).

Operating leases

Future minimum lease payments are as follows:

2005 2004AED'000 AED'000

Aircraft fleet 14,936,397 12,945,967Other 720,516 29,245

15,656,913 12,975,212

Less than 1 year 1,825,724 1,401,6402-5 years 7,908,262 5,961,496After 5 years 5,922,927 5,612,076

15,656,913 12,975,212

In the event of aircraft leases being terminated prior to their expiry,penalties are payable. Had these leases been cancelled at 31 March 2005,the penalties would have been AED 473.9 million (2004: AED 392.6 million).

Emirates is entitled to extend certain aircraft leases for a further period ofone to three years at the end of the initial lease period. Further, Emirates isentitled to purchase twenty four of the fifty aircraft under these leases.

In addition, Emirates has twenty eight Airbus / Boeing aircraft contractedon operating lease for delivery between April 2005 and May 2008.

Emi rates

96

19. Provisions

End of Frequentservice flyerbenefit programme Total

AED'000 AED'000 AED'000

Balance brought forward 217,532 21,187 238,719

Acquisitions (Note 28) 84 - 84

Charge for the year 49,145 36,060 85,205

Payments made / benefits utilised during the year (18,192) (16,058) (34,250)

Balance carried forward 248,569 41,189 289,758

UAE national employees participate in the UAE government’spension fund to which the employee and Emirates contribute aspecified percentage of salary.

Senior employees who are based in the UAE participate in a definedcontribution provident fund to which the employee and Emiratescontribute a specified percentage of salary.

The end of service benefit provision relates to employees who donot participate in the provident fund or the UAE government’spension fund.

In accordance with the provisions of IAS 19, management hascarried out an exercise to assess the present value of its obligationsat 31 March 2005, in respect of employees’ end of service benefitspayable under the relevant local regulations. The assessmentassumed average expected salary increases between 0% and 5%and a discount rate of 6% per annum. The present values of theobligations at 31 March 2005, using the actuarial assumptions asset out above, were not materially different from the provisioncomputed in accordance with relevant local regulations.

20. Deferred credits

2005 2004AED'000 AED'000

Balance brought forward 572,585 618,662

Additions during the year 87,407 26,478

Recognised during the year (78,334) (72,555)

Balance carried forward 581,658 572,585

21. Trade and other payables

Trade payables and accruals 3,290,067 2,638,127

Passenger and cargo sales in advance 2,232,928 1,618,969

Dividend payable 368,000 300,000

5,890,995 4,557,096

Emi rates

97

22. Borrowings and lease liabilities - current

2005 2004AED'000 AED'000

Lease liabilities (Note 18) 453,734 638,869Term loans (Note 17) 53,505 4,000Bank overdrafts (Note 25) - 10,997

507,239 653,866

23. Commitments

Capital commitments

Authorised and contracted:

Aircraft fleet 44,349,807 43,322,719Other 2,169,198 1,175,295Jointly controlled operation 79,220 53,042

46,598,225 44,551,056

Authorised but not contracted:

Aircraft fleet - 49,329Other 2,112,169 2,921,013Jointly controlled operation 19,143 15,176

2,131,312 2,985,518

48,729,537 47,536,574

Commitments have been entered into for the purchase of aircraft for delivery asfollows (Note 8):

Financial year Aircraft 2005 - 2006 7Beyond 2005 - 2006 55

In addition, options are held on eight Airbus and nine Boeing aircraft.

Operational commitments

2005 2004AED'000 AED'000

Letters of credit issued by bankersin the normal course of business 285,337 104,663

24. Guarantees

Performance bonds provided by bankersin the normal course of business 27,725 67,770

Emi rates

98

25. Cash and cash equivalents

2005 2004AED'000 AED'000

Short term bank deposits and liquid funds 6,970,502 6,115,386Cash and bank 357,957 339,543

7,328,459 6,454,929

Bank overdrafts (Note 22) - (10,997)

7,328,459 6,443,932

Transactions are limited to financial institutions possessing highcredit quality and hence the risk of default is low. Short term bankdeposits and liquid funds bear an effective interest rate of 2.05%(2004: 1.49%) per annum.

26. Analysis of capital expenditure

For the purposes of the consolidated statementof cash flows, capital expenditure is analysed asunder:

2005 2004AED'000 AED'000

Purchase of property, plant and equipment (Note 8) 2,828,678 1,339,055Less: Assets acquired under finance leases (465,506) (293,842)

Capital expenditure 2,363,172 1,045,213

27. Financial instruments

(i) Interest rate risk Emirates is exposed to interest rate fluctuations on the internationalfinancial market with respect to interest cost and interest income.

Interest cost The long term debt portfolio of Emirates has a blend of fixed andfloating rate debt and lease liabilities. Emirates closely monitorsinterest rate trends and the related impact on interest costs andmanages interest rate exposure by maintaining an appropriate blendof fixed and floating rate debt and lease liabilities and by enteringinto interest rate swaps and options. A 1% increase in interest ratesrelating to the debt and operating lease liabilities will increase thecharge to the income statement in the next financial year byAED 92.1 million (2004: AED 102.9 million). Aircraft related financingand term loans bear an effective interest rate of 4.19% (2004: 4.22%)per annum while the effective interest rate on bonds was 2.61%(2004: 2.06%) per annum.

Interest income Emirates earns interest income on its cash surpluses. Emiratesclosely monitors interest rate trends and the related impact oninterest income and manages interest rate exposure by enteringinto interest rate swaps and options.

Emi rates

99

27. Financial instruments(continued)

Description Term AED'000

Cash flow hedge2005Interest rate swap liability 2005-2015 67,241

2004Interest rate swap liability 2004-2015 74,868

Fair value hedge2005Interest rate swaps Nil

2004Interest rate swap liability 519

The notional principal amounts of the outstanding contracts at 31 March 2005 wereAED 866.8 million (2004: AED 784.3 million).

Inflows on account of liquidated interest rate derivatives amounting to AED 1.2 million(2004: AED 21.5 million) will enter into the determination of profit in 2005.

(ii) Currency risk Emirates is exposed to exchange rate fluctuations between the US Dollar and othercurrencies which are generated from its sales activities. Emirates’ reporting currency,UAE Dirham is pegged to the US Dollar. Emirates closely monitors currency rate trendsand the related impact on revenues. Emirates manages its currency exposure as follows:

(a) where appropriate by structuring aircraft financing leases in currencies in whichrevenues are being generated to form a natural hedge. Where a currencyexposure is created on account of certain end-of-lease obligations relating toaircraft lease transactions; this is managed by means of forward foreigncurrency contracts

(b) by entering into strategic forward foreign exchange positions in respect of anappropriate portion of its major foreign currency future cash inflows

Exchange rate hedges

Description Term AED'000

Cash flow hedge2005Currency swap asset 2005 46Currency swap liability 2005-2012 325,707

2004Currency swap asset 2004 9,240Currency swap liability 2004-2012 249,154

Emi rates

100

27. Financial instruments(continued)

The notional principal amounts of the outstanding contracts at 31 March 2005 wereAED 1,511.5 million (2004: AED 1,878.8 million).

Inflows on account of liquidated currency derivatives amounting to AED 18.5 million(2004: AED 22.1 million) will enter into the determination of profit between 2005 and 2011.

A letter of credit for AED 148.2 million has been placed as a collateral against the liabilitywhich was previously provided in the form of a margin call account amounting toAED 106.7 million.

A currency derivative entered into to hedge exposure on operating lease outflows in 2011has been liquidated and a gain of AED 31.1 million realised. As the forecasted transactionis no longer expected to occur, this has been taken to the income statement as anexchange gain.

(iii) Fuel price risk The airline industry is exposed to fluctuations in the price of jet fuel. Emirates closelymonitors the actual cost of fuel against forecasted cost. Emirates utilises commodityfutures and options to manage fuel costs.

Fuel price hedges

Description Term AED'000

Cash flow hedge2005Futures and options asset 2005-2006 563,689Futures and options asset 2006-2010 734,502

Futures and options liability 2005-2006 88,002

2004Futures and options asset 2004-2005 309,072Futures and options asset 2005-2009 98,467

The notional principal amounts of the outstanding contracts at 31 March 2005 wereAED 7,048.9 million (2004: AED 1,474.8 million).

Inflows on account of liquidated derivatives amounting to AED 47.9 million will enter intothe determination of profit between 2005 and 2007.

(iv) Credit risk on derivative financial instruments Derivative counterparties are limited to financial institutions possessing high credit

quality and hence the risk of default is low.

Emi rates

101

28. Business combinationsOn 1 July 2004, Maritime & Mercantile International L.L.C. acquired 100% ofthe shares in Duty Free Dubai Ports FZE (DFDP), a free zone establishment withexclusive rights to sell duty free products in all ports controlled by the DubaiPorts Authority.

On 1 July 2004, Maritime & Mercantile International L.L.C. also acquired 100%of the shares in Harts International Retailers (Middle East) FZE, themanagement company of DFDP.

The acquired business contributed revenues of AED 29.8 million and net profitof AED 1.4 million from the acquisition date to 31 March 2005.

The assets and liabilities arising fromacquisition of subsidiaries are as follows:

Recognised onacquisition /Acquiree’s

carrying amount

AED'000

Cash and cash equivalents 209

Property, plant and equipment 354

Other current assets 3,507

Current liabilities (3,808)

Borrowings (694)

End of service benefit provision (84)

Fair value of net assets acquired (516)

Goodwill 6,738

Total purchase consideration 6,222

Less: Cash and cash equivalents (209)

Cash outflow on acquisitions 6,013

The purchase consideration includes direct costs of the acquisition amounting toAED 0.4 million.

The goodwill arising on the acquisition is fully impaired (Note 9).

There were no acquisitions in the prior year.

102

Dnata

Independent auditors’ report to the Government of Dubai

We have audited the accompanying consolidated balance sheet of Dnata ("the

company") and its subsidiaries (together referred to as "Dnata") as at 31 March 2005 and

the related consolidated statements of income and cash flows for the year then ended.

These financial statements are the responsibility of the company’s management. Our

responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those

Standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement. An audit

includes examining, on a test basis, evidence supporting the amounts and disclosures in

the financial statements. An audit also includes assessing the accounting principles used

and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audit provides a reasonable basis

for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material

respects, the financial position of Dnata as at 31 March 2005 and the results of its

operations and its cash flows for the year then ended in accordance with International

Financial Reporting Standards.

PricewaterhouseCoopers

Chartered Accountants

Dubai

16 April 2005

103

Dnata

Consolidated income statement for the year ended 31 March 2005

Notes 2005 2004AED'000 AED'000

Operating revenue 2 1,354,590 1,054,756

Other operating income 35,709 24,041

Operating costs 3 (1,149,349) (920,169)

Operating profit 240,950 158,628

Net financing income 4 14,166 8,738

Associated companies - share of results 8 7,193 6,413

Profit before taxation 262,309 173,779

Income tax expense 5 (1,902) -

Profit for the year 260,407 173,779

The accounting policies on pages 107 to 110 and the notes onpages 111 to 119 form an integral part of the consolidatedfinancial statements.

104

Dnata

Consolidated balance sheet at 31 March 2005

Notes 2005 2004AED'000 AED'000

ASSETS

Non-current assetsProperty, plant and equipment 6 558,657 267,587Intangible assets 7 182,358 23,291 Investment in associated companies 8 34,300 22,585 Held-to-maturity investment 9 128,555 - Receivables 10 3,285 -Advance lease rentals 11 27,467 -

934,622 313,463

Current assetsInventories 15,111 11,788Trade and other receivables 12 283,274 193,473Cash and cash equivalents 21 843,115 833,714

1,141,500 1,038,975

Total assets 2,076,122 1,352,438

EQUITY AND LIABILITIES

Capital and reservesCapital 13 62,615 62,615Reserves 1,063,644 803,708

1,126,259 866,323

Non-current liabilitiesEnd of service benefit provision 14 152,007 135,964Term loan 15 278,397 -Deferred tax liability 16 49,642 -

480,046 135,964

Current liabilitiesTrade and other payables 17 428,176 350,151Term loan 15 31,133 -Taxation 10,508 -

469,817 350,151

Total liabilities 949,863 486,115

Total equity and liabilities 2,076,122 1,352,438

The consolidated financial statements were approved on the 16th day of April 2005 and signed by:

Sheikh Ahmed bin Saeed Al-Maktoum Maurice FlanaganChairman Vice Chairman and Group President

The accounting policies on pages 107 to 110 and the notes onpages 111 to 119 form an integral part of the consolidatedfinancial statements.

105

Dnata

Consolidated statement of changes in equity for the year ended 31 March 2005

Translation RetainedCapital reserve earnings TotalAED'000 AED'000 AED'000 AED'000

1 April 2003 62,615 (4,004) 662,543 721,154

Profit for the year - - 173,779 173,779

Dividend - - (29,000) (29,000)

Currency translation differences - 390 - 390

1 April 2004 62,615 (3,614) 807,322 866,323

Profit for the year - - 260,407 260,407

Currency translation differences - (471) - (471)

31 March 2005 62,615 (4,085) 1,067,729 1,126,259

The accounting policies on pages 107 to110 and the notes on pages 111 to 119form an integral part of the consolidatedfinancial statements.

106

Dnata

Consolidated statement of cash flows for the year ended 31 March 2005

2005 2004AED'000 AED'000

Operating activitiesProfit for the year before tax 262,309 173,779Adjustments for:Depreciation and amortisation (Note 3) 117,828 89,985Net financing income (Note 4) (14,166) (8,738)Provision for employee benefits 33,832 27,895Charge for / (write back of) impairment of trade receivables 2,751 (720)Associated companies - share of results (Note 8) (7,193) (6,413)Profit on sale of property, plant and equipment (1,433) (293)Advance lease rental recognised (Note 11) 572 -

Operating cash flows before working capital changes 394,500 275,495

Employee benefit payments (17,789) (15,457)

Changes in working capital:Inventories 282 (3,568)Trade and other receivables (48,360) (26,049)Trade and other payables 42,048 64,459Tax paid (838) -

Net cash provided from operating activities 369,843 294,880

Investing activitiesPurchase of property, plant and equipment (Note 6) (142,413) (151,083)Additions to intangible assets (Note 7) (21,936) (8,239)Proceeds from sale of property, plant and equipment 4,451 830Investment in associated company (Note 8) (1,037) (3,000)Emirates account - 28,846Net financing income 13,244 7,168Dividend received from associated companies (Note 8) 8,628 5,277Held-to-maturity investment made during the year (Note 9) (128,555) -Loans to associated companies (Note 10) (3,637) -Acquisition (Note 22) (367,014) -

Net cash used in investing activities (638,269) (120,201)

Financing activitiesDividend paid (29,000) (40,000)Term loan (Note 15) 309,530 -

Net cash provided from / (used in) financing activities 280,530 (40,000)

Net increase in cash and cash equivalents 12,104 134,679

Cash and cash equivalents at beginning of year 833,714 698,700Effects of exchange rate changes (2,703) 335

Cash and cash equivalents at end of year (Note 21) 843,115 833,714

The accounting policies on pages 107 to 110 and the notes on pages111 to 119 form an integral part of the consolidated financial statements.

107

Dnata

Principal accounting policies

A summary of the principal accountingpolicies, which have been appliedconsistently, is set out below.

Basis of preparation

Basis of consolidation

Revenue

The consolidated financial statements have been prepared in accordance withand comply with International Financial Reporting Standards. Theconsolidated financial statements are prepared under the historical costconvention.

Subsidiaries are those entities in which Dnata has an interest of more than onehalf of the voting rights or otherwise has the power to govern the entity’soperating and financial policies. Subsidiaries are consolidated from the date onwhich control is transferred to Dnata and are no longer consolidated from thedate that control ceases. All material inter-company transactions, balances andunrealised surpluses and deficits arising on transactions between Dnata and itssubsidiaries are eliminated.

The purchase method of accounting is used to account for acquisition ofsubsidiaries. The cost of an acquisition is measured as the fair value of assetsgiven and liabilities assumed at the date of exchange, plus costs directlyattributable to the acquisition. Identifiable assets including intangibles acquired,liabilities and contingent liabilities assumed in a business combination aremeasured at their fair values at the acquisition date.

Associated companies are those entities in which Dnata has between 20% and50% of the voting rights, or over which it has significant influence, but which itdoes not control. Investment in associated companies are accounted for inaccordance with the equity method and includes goodwill (net of accumulatedimpairment loss) on acquisition.

All material unrealised surpluses and deficits arising on transactions betweenDnata and its associates are eliminated to the extent of Dnata’s interest in theassociated company.

Revenue from sale of services is stated net of value-added taxes, rebates anddiscounts, and is recognised on the performance of services.

Revenue from sale of goods is recognised when risks and rewards of ownershipare transferred to the customer and is stated net of discounts.

Revenue from information technology services is recognised as services arerendered for time-and-material contracts and as per the percentage-of-completion method with reference to the stage of completion for softwareimplementation services.

Interest income is recognised on a time proportion basis using the effectiveinterest method.

108

Dnata

Principal accounting policies (continued)

Foreign currency translation

Property, plant andequipment

Capital projects

Intangible assets

Foreign currency transactions are translated into UAE Dirhams at exchange ratesapproximating those ruling on the transaction dates. Monetary assets and liabilitiesdenominated in foreign currencies are translated into UAE Dirhams at the exchange ratesruling on the balance sheet date. The resultant foreign exchange gains or losses arerecognised in the income statement.

Income statements and cash flows of subsidiaries are translated into UAE Dirhams ataverage exchange rates for the year and their balance sheets are translated at theexchange rates ruling on the balance sheet date. Share of results in associatedcompanies are translated into UAE Dirhams at average exchange rates for the year.

Translation differences relating to investments in associated companies and subsidiariesare classified as translation reserve in equity until the disposal of the investment when thetranslation differences are recognised in the income statement as part of the gain or losson sale.

Property, plant and equipment is stated at cost less accumulated depreciation. Cost consistsof purchase cost, together with any incidental expenses of acquisition.

Depreciation is calculated so as to write off the cost of property, plant and equipment on astraight line basis over the useful lives of the assets concerned. The estimated useful lives are:

Buildings 5 - 20 yearsLeasehold property over the remaining term of the leaseAirport plant and equipment 5 - 10 yearsOffice equipment and furniture 3 - 5 yearsMotor vehicles 5 years

When the carrying amount of property, plant and equipment is greater than its estimatedrecoverable amount, it is written down immediately to its recoverable amount.

Repairs and maintenance are charged to the income statement during the period in whichthey are incurred. Major modifications and improvements to property, plant and equipmentare capitalised and depreciated over the lower of the remaining useful life or lease term of therelated asset.

Capital projects are stated at cost together with financing costs incurred from the date ofcommencement of the project to the date on which it is commissioned. Whencommissioned, capital projects are transferred to the appropriate category underproperty, plant and equipment and depreciated in accordance with Dnata’s policies.

Intangible assets are capitalised at cost only when future economic benefits are probable.Cost includes purchase price together with any directly attributable expenditure.

When the carrying amount of an intangible asset is greater than its estimated recoverableamount, it is written down immediately to its recoverable amount.

Intangible assets are amortised on a straight line basis over their estimated useful lives ofthe concerned assets which are:

Contractual rights over the term of the rightsComputer software 5 years

Dnata

Principal accounting policies (continued)

109

Goodwill

Held-to-maturity investments

Operating leases

Inventories

Trade receivables

Borrowings

Goodwill represents the excess of the cost of an acquisition or subsequent exchangetransactions over the fair value of the share of the identifiable net assets acquired byDnata in its subsidiaries at the date of acquisition or subsequent exchange transactions.Goodwill is presented with intangible assets.

Goodwill is tested annually for impairment and carried at cost less accumulatedimpairment losses. For the purpose of impairment testing, goodwill is allocated to cashgenerating units. An impairment loss is recognised when the carrying value of the cashgenerating unit exceeds its recoverable amount.

Investments with fixed maturity that management has the intent and ability to hold tomaturity are recognised in the balance sheet on the trade date as held-to-maturityinvestments. Such investments are stated at amortised cost using the effective interestmethod.

At each balance sheet date a review is made for an indication of impairment and wherenecessary the carrying amount is written down through the income statement to thepresent value of expected future cash flows discounted at current market rates.

Leases where a significant portion of risks and rewards of ownership are retained by thelessor are classified as operating leases. Lease rental charges including advance rentalsin respect of operating leases are charged to the income statement on a straight line basisover the period of the lease.

Inventories are stated at the lower of cost or net realisable value. Cost is determined onthe weighted average cost basis.

Trade receivables are carried at original invoice amount less provision made forimpairment of these receivables. Where there is objective evidence of amounts that arenot collectible, a provision is made for the difference between the carrying amount andthe recoverable amount.

Borrowings are recognised initially at the proceeds received, net of transaction costsincurred. After initial recognition, borrowings are subsequently stated at amortised costusing the effective interest method.

110

Dnata

Principal accounting policies (continued)

UAE national employees participate in the UAE government’s pension fund towhich the employee and Dnata contribute a specified percentage of salary.Contributions to the pension fund are charged to the income statement in theperiod in which they fall due.

Senior employees who are based in the UAE participate in a definedcontribution provident fund to which the employee and Dnata contribute aspecified percentage of salary. Contributions to the provident fund are chargedto the income statement in the period in which they fall due.

End of service benefits for other employees based in the UAE are provided foras per UAE labour law and are based on periods of cumulative service andemployee’s current basic salary.

End of service benefits for employees based outside the UAE are provided forin accordance with the relevant local regulations.

Deferred income tax is provided in full, using the liability method, on temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Deferred income tax isdetermined using tax rates (and laws) that have been enacted or substantiallyenacted in the jurisdiction of the individual companies by the balance sheetdate and are expected to apply when the related deferred income tax liabilityis settled or the deferred tax asset realised.

Deferred income tax assets are recognised to the extent that it is probable thatfuture taxable profit will be available against which the temporary differencescan be utilised.

For the purpose of the cash flow statement, cash and cash equivalentscomprise all cash and liquid funds with an original maturity of less than threemonths, net of bank overdrafts.

Employee benefits

Deferred income taxes

Cash and cash equivalents

111

1. Establishment and operationsDnata comprises Dnata, its subsidiaries and associated companies. Dnata wasincorporated in the emirate of Dubai, UAE with limited liability, under an EmiriDecree issued by H.H. Sheikh Maktoum bin Rashid Al-Maktoum on 4 April 1987.On that date, Dnata took over for nil consideration, the total assets and liabilitiesof Dubai National Air Travel Agency with effect from 1 April 1987. Dnata is whollyowned by the Government of Dubai.

The main activities of Dnata comprise: � aircraft handling and engineering services� handling services for export and import cargo� information technology services� representing airlines as their general sales agent� travel agency and other travel related services� inflight and institutional catering

2. Operating revenue

2005 2004AED'000 AED'000

ServicesAirport operations 564,528 440,539Information technology 264,474 246,168Cargo 242,877 151,936Reservations system 109,633 100,501Agency commission 93,506 83,427Other 34,220 32,185

1,309,238 1,054,756

Sale of goods 45,352 -

1,354,590 1,054,756

3. Operating costs

Employee (see below) 685,733 577,207Depreciation and amortisation 117,828 89,985Office accommodation 45,227 44,376Cost of goods sold 13,345 -Operating lease rentals 7,463 -Corporate overheads 279,753 208,601

1,149,349 920,169

(a) Employee costs include AED 33.8 million (2004: AED 27.9 million) in respect ofemployee benefits and AED 22.6 million (2004: AED 48.4 million) in respect ofthe employee profit share scheme.

(b) Average employee strength during the year was 9,607 (2004: 7,325) including1,247 employees relating to the subsidiaries acquired during the year.

4. Net financing income

2005 2004AED'000 AED'000

Interest income 16,539 8,738Interest charges (2,373) -

14,166 8,738

Dnata

Notes to the consolidated financial statements for the year ended 31 March 2005

Dnata

112

5. Income tax

The components of income tax expense are:

2005 2004AED'000 AED'000

Current tax 1,670 -Deferred tax charge (Note 16) 232 -

1,902 -

Taxation relates to a subsidiary company which is subject to tax. Hence providinginformation on effective tax rates is not meaningful.

6. Property, plant and equipment

Buildings Officeand Airport equipment

leasehold plant and and Motor Capitalproperty equipment furniture vehicles projects TotalAED'000 AED'000 AED'000 AED'000 AED'000 AED'000

Cost

1 April 2004 75,395 278,306 458,317 15,477 12 827,507

Additions 951 51,709 54,665 2,299 32,789 142,413

Acquisition (Note 22) 231,816 21,317 665 - 1,469 255,267

Currency translation differences 1,618 149 5 - 10 1,782

Transfer from capital projects 7,320 1,657 2,368 - (11,345) -

Disposals (7) (11,753) (16,842) (1,093) - (29,695)

31 March 2005 317,093 341,385 499,178 16,683 22,935 1,197,274

Depreciation

1 April 2004 35,792 159,681 354,716 9,731 - 559,920

Charge for the year 9,823 40,743 52,729 2,121 - 105,416

Disposals (7) (11,457) (14,198) (1,057) - (26,719)

31 March 2005 45,608 188,967 393,247 10,795 - 638,617

Net book value

31 March 2005 271,485 152,418 105,931 5,888 22,935 558,657

31 March 2004 39,603 118,625 103,601 5,746 12 267,587

Dnata

113

7. Intangible assets

Contractual ComputerGoodwill rights software TotalAED'000 AED'000 AED'000 AED'000

Cost

1 April 2004 - - 53,128 53,128

Additions - - 21,936 21,936

Acquisition (Note 22) 70,852 76,096 1,601 148,549

Currency translation differences 494 531 11 1,036

Disposals - - (142) (142)

31 March 2005 71,346 76,627 76,534 224,507

Amortisation

1 April 2004 - - 29,837 29,837

Charge for the year - 3,544 8,868 12,412

Disposals - - (100) (100)

31 March 2005 - 3,544 38,605 42,149

Net book value

31 March 2005 71,346 73,083 37,929 182,358

31 March 2004 - - 23,291 23,291

Computer software includes an amount of AED 9.4 million (2004: AED 15.8 million)in respect of projects under implementation.

For the purpose of testing goodwill for impairment, the entire goodwill is allocatedto the airport services cash generating unit based in the Far East. The recoverableamount for the cash generating unit has been determined on the basis of fair valueless cost to sell. The calculations arrive at a business enterprise value using thediscounted cash flow methodology.

The key assumptions and basis to arrive at the fair value include a risk adjusteddiscount rate, historical gross margins and growth rates based on management’sexpectations for market development.

Dnata

114

8. Investment in subsidiaries and

associated companies

The subsidiaries and associated companies are:

Percentage Country ofof incorporation

equity and principalowned Principal activities operations

Subsidiaries

Dnata Travel (UK) Ltd. 100 Travel agency UK

Dnata Inc. 100 Aircraft handling services Philippines

Kedma Holdings Pte Ltd. 100 Investment company Singapore

Changi International Airport Services (International) Pte Ltd. 100 Investment company Singapore

Changi International Airport Services Pte Ltd. 100 Aircraft handling and Singapore catering services

CIAS Enterprises Pte Ltd. 100 Institutional catering Singapore

Associated companies

Dubai Express L.L.C. 50 Freight clearing and forwarding UAE

Gerry’s Dnata (Private) Ltd. 50 Aircraft handling services Pakistan

Safiran Dnata Airport Services PJSC 49 Ground handling services Iran

Emirates Loyalty Company L.L.C. 40 Customer loyalty programme UAE

Dnata Arabian Airport Services Co. Ltd. 50 Aircraft handling services Sudan

Guangzhou Baiyun International Airport People’s RepublicGround Handling Services Co. Ltd. 20 Ground handling services of China

The investment in Dnata Arabian Airport Services Co. Ltd. was madeduring the year. Kedma Holdings Pte Ltd. was incorporated as a whollyowned investment company during the year for Dnata’s investment in theChangi International Airport Services (International) Pte Ltd. groupcomprising of Changi International Airport Services Pte Ltd., CIASEnterprises Pte Ltd. and Guangzhou Baiyun International Airport GroundHandling Services Co. Ltd..

Dnata Wings Aviation Systems Corporation was renamed as Dnata Inc..

There were no other changes in ownership during the year.

Movement of investment in associated companies

2005 2004AED'000 AED'000

Balance brought forward 22,585 20,775

Acquisition (Note 22) 12,504 -

Investment during the year 1,037 3,000

Share of results 7,193 6,413

Goodwill amortised - (2,381)

Dividend received (8,628) (5,277)

Translation difference (391) 55

Balance carried forward 34,300 22,585

Dnata

115

9. Held-to-maturity investmentHeld-to-maturity investment represents a floating rate US dollar bank deposit withAbu Dhabi Commercial Bank maturing in May 2006. The effective interest rateduring the year was 2.35% per annum.

10. Receivables

2005 2004AED'000 AED'000

Loans to associated companies 3,637 -Less: Payable within one year (352) -

3,285 -

The effective interest rate on loans to associated companies was 4.18% per annum.

11. Advance lease rentals

2005 2004AED'000 AED'000

Acquisition (Note 22) 28,039 -Charge for the year (572) -

Balance carried forward 27,467 -

12. Trade and other receivables

Trade receivables

Travel agents 17,626 11,088Airlines 55,368 30,719Other 120,328 85,801

193,322 127,608

Other receivables and prepayments

Prepayments and deposits 21,475 18,934Associated company (Note 10) 352 -Other 68,125 46,931

89,952 65,865

283,274 193,473

There is no significant concentration of credit risk.

13. CapitalCapital represents the value of the net assets taken over from Dubai National AirTravel Agency for nil consideration with effect from 1 April 1987.

Dnata

116

14. End of service benefit provision

2005AED'000

Balance brought forward 135,964

Charge for the year 25,724

Payments during the year (9,681)

Balance carried forward 152,007

UAE national employees participate in the UAE government’s pension fund towhich the employee and Dnata contribute a specified percentage of salary.

Senior employees who are based in the UAE participate in a definedcontribution provident fund to which the employee and Dnata contribute aspecified percentage of salary.

End of service benefits for employees based outside the UAE are provided forin accordance with the relevant local regulations.

The end of service benefit provision relates to employees who do notparticipate in the provident fund or the UAE government’s pension fund.

In accordance with the provisions of IAS 19, management has carried out anexercise to assess the present value of its obligations at 31 March 2005, inrespect of employees’ end of service benefits payable under the relevant localregulations. The assessment assumed average expected salary increasesbetween 0% and 5% and a discount rate of 6% per annum. The presentvalues of the obligations at 31 March 2005, using the actuarial assumptions asset out above, were not materially different from the provision computed inaccordance with relevant local regulations.

15. Term loan

2005AED'000

Raised during the year 311,328Less: unamortised transactions costs (1,798)

Balance carried forward 309,530

The loan is repayable as follows:

Within one year 31,133

2-5 years 123,732After 5 years 154,665

Total over one year 278,397

The term loan is secured by a charge on the shares of Changi InternationalAirport Services (International) Pte Ltd. and Changi International AirportServices Pte Ltd. in addition to a corporate guarantee provided by Dnata.

The effective interest on the loan was 1.67% per annum.

Dnata

117

16. Deferred tax liabilityDeferred tax assets and liabilities are offset when there is legallyenforceable right to offset current tax assets against current taxliabilities and when the deferred taxes relate to the same incometax authority.

The movement in the deferred tax liability account is asfollows:

2005AED'000

Acquisition (Note 22) (49,410)Charged to the income statement (232)

31 March 2005 (49,642)

The movements in deferred tax assets and liabilitiesduring the year, without taking into consideration theoffsetting of balances within the same tax jurisdiction isas follows:

Deferred tax liabilities

Property, plant Intangible& equipment assets Total

2005 2005 2005AED'000 AED'000 AED'000

Acquisition (Note 22) (35,651) (15,325) (50,976)(Charged) / credited to the income statement (645) 709 64

31 March 2005 (36,296) (14,616) (50,912)

Deferred tax assets

Impairmentof receivables Accruals Total

2005 2005 2005AED'000 AED'000 AED'000

Acquisition (Note 22) 765 801 1,566(Charged) / credited to the income statement (316) 20 (296)

31 March 2005 449 821 1,270

Dnata

118

17. Trade and other payables

2005 2004AED'000 AED'000

Payables and accruals 296,346 221,469Dividend payable - 29,000Employee leave pay 31,645 26,312Airlines 100,185 73,370

428,176 350,151

18. Operating leases

Future minimum lease payments are as follows:

Less than 1 year 5,964 -2-5 years 20,250 -After 5 years 57,782 -

83,996 -

19. Capital commitments

Authorised and contracted 65,220 7,915Authorised but not contracted 314,694 333,195

379,914 341,110

20. Guarantees

Guarantees provided by Dnata’s bankers in thenormal course of business 50,474 32,032

21. Cash and cash equivalents

Short term bank deposits and liquid funds 734,416 802,765Cash and bank 108,699 30,949

843,115 833,714

Transactions are limited to financial institutions possessing high creditquality and hence the risk of default is low. Short term bank deposits andliquid funds bear an effective interest rate of 1.67% (2004: 1.1%) perannum.

Dnata

119

22. Business combinationsDnata acquired 100% of the shares in Changi International AirportServices International (CIASI), which in turn holds 78.4% of the sharesin Changi International Airport Services Pte Ltd. (CIAS) through itswholly owned subsidiary Kedma Holdings Pte Ltd.. The balance 21.6%of the shares in CIAS has also been acquired by Kedma Holdings PteLtd. from the other shareholders. The effective date of the acquisitionwas 6 October 2004, on which date control passed to Dnata. Theacquired business contributed revenues of AED 138.1 million and netprofit of AED 11.3 million from the acquisition date to 31 March 2005.The principal activities of CIAS, the operating company, are providingaircraft handling and catering services in Singapore.

The assets and liabilities arising from acquisitionof subsidiaries are as follows:

Recognised Acquiree'son carrying

acquisition amountAED'000 AED'000

Cash and cash equivalents 32,324 32,324

Property, plant and equipment 255,267 135,314

Intangible assets 77,697 1,601

Advance lease rentals 28,039 26,694

Investment in associated company 12,504 12,504

Other current assets 46,185 46,185

Current liabilities (74,120) (74,120)

Deferred tax liability (49,410) (9,658)

Fair value of net assets acquired 328,486 170,844

Goodwill 70,852

Total purchase consideration 399,338

Less: Cash and cash equivalents (32,324)

Cash outflow on acquisitions 367,014

The purchase consideration includes direct costs of the acquisitionamounting to AED 1.8 million.

The goodwill is attributable to the high profitability of the acquiredbusiness.

There were no acquisitions in the prior year.